Jay Clayton, the Chairman of the United States Securities and Exchange Commission (SEC), appeared in a hearing before the House Appropriations Committee and talked about Bitcoin and the cryptocurrencies as well. Clayton affirmed that cryptocurrencies such as Bitcoin (BTC) could not be considered as securities.
The very same day, a hearing took place about the supervision of the Division of Corporate Finance of the SEC. During this hearing, a congressman from California, Brad Sherman, proposed to prohibit the initial coin offerings (ICOs) in the United States. Sherman said: “The reason for securities markets is to provide jobs in the real economy. An IPO [initial public offering] does that, an ICO does the opposite. It takes money out of the real economy. I’m not saying ban blockchain, I’m saying ban the ICOs.”
William Hinman, the director of the Division of Corporate Finance, responded by saying the SEC was looking for a point of equilibrium when it comes to the ICOs. Another congressman, Tom Emmer from Minnesota, criticized the Sherman’s ignorance about the potential of the ICOs and cryptocurrencies: “People tend to fear what they don’t know. If people sailing the oceans at the time of Columbus had believed the world is flat we wouldn’t have had the great discoveries of the New World.” Emmer stood up for the cryptocurrencies in March this year when he said the United States must be careful in order to avoid over regulating the cryptocurrency sector. During the hearing, Emmer asked Hinman if there were circumstances in which a token sale would be something else than a securities offering. Hinman said it was hard to hold an ICO without it being security issuance. He also added that it was certainly possible to have tokens that would not have the hallmarks of a security: “A token where the holder is buying it for its utility rather than investment, especially if it’s a decentralized network in which it’s used with no central actors.”
The flexible position taken by the director of the Division of Corporate Finance of the SEC when it comes to the ICOs is in line with the position taken at the beginning of this month by Jay Clayton, the Chairman of the SEC. During a discussion in one university, Clayton said that not all the ICOs could be considered as fraudulent and that, with adequate regulations, the ICOs could become secure for the possible investors, at the same time that they acquire the potential to greatly benefit the industries linked to the blockchain technology.
On the other hand, Christopher Douglas Stewart, one of the congressmen that represents the Utah’s 2nd congressional district in US House of Representatives interpellated the Chairman of the SEC about the way the Commission should coordinate with the Commodity Futures Trading Commission (CFTC) to create a plan for the regulation of the cryptocurrencies.
Jay Clayton responded: “It’s a complicated area. Because, as you said, there are different types of cryptoassets. Let me try and divide them into two areas. A pure medium of exchange, the one that’s most often cited, is Bitcoin. As a replacement for currency, that has been determined by most people to not be a security.
Then there are tokens, which are used to finance projects. I’ve been on the record saying there are very few, there’s none that I’ve seen, tokens that aren’t securities. To the extent something is a security, we should regulate it as a security, and our securities regulations are disclosure-based, and people should follow those and provide the information that we require.”
In this sense, if the cryptocurrencies such as Bitcoin are not securities, then they could not be covered by the SEC’s existing regulations for the financial securities.