The United States Securities and Exchange Commission (SEC) came out with this brand new term: Crypto Asset Securities.
This is a brand new term that we have heard from the regulatory agency is using, and the reason why this is problematic is because the SEC cannot currently tell us the difference between a crypto asset and a security.
The Term “Crypto Asset Securities” Is Problematic
The reason why this term “crypto asset security” is very problematic for the crypto community is because again, we have no guidelines in any way, shape or form — and what the SEC is basically indicating is that every single cryptocurrency or digital asset is a security and that is not correct at all.
So, we are going to go ahead and talk about the four key statements they made in their Investor Alert letter.
1st Statement: Those offering crypto asset investments or services may not be complying with applicable law, including federal securities laws.
Basically, the regulatory agency is talking about broker dealers, investment advisors, alternative trading systems and Proof of Reserves (PoR) — I agree with them on Proof of Reserves, and that every single centralized crypto exchange has or should have the capabilities to utilize blockchain technology.
However, the problem here again is that the agency is still not classifying what is a crypto security and what is not a crypto security.
Read: Binance’s Case Law Helps XRP In The Ripple-SEC Settlement – Details
2nd Statement: Investments in crypto asset securities can be exceptionally risky, and are often volatile.
The SEC is talking about crypto exchanges, in which I have got no problem with that either.
But there is some other very problematic wording in there when they are talking about “volatility.” It is worth mentioning that the equities or the stock market is very volatile too.
Read: What To Expect If The SEC Approves Bitcoin ETFs
3rd Statement: Fraudsters continue to exploit the rising popularity of crypto assets to lure retail investors into scams, often leading to devastating losses.
This is an absolutely atrocious idea or biased statement by the SEC — the reason being, this stuff happens in traditional finance (TradFi), and with banking institutions as well. And yes, there are bad actors in crypto, but at the same time, crypto is transparent and if the agency actually did their job, we would not even have this issue.
Read: US Lawmakers Propose Cutting SEC Chair’s Salary To $1, Citing Crypto Prohibition
4th Statement: Having an investing plan, as well as understanding your risk tolerance and time horizon, can be critical to your investing success.
With this statement, I absolutely agree with it, and I think the SEC is right here when we talk about having a trading and investing plan all the time and understanding the market in my previous articles. But again, the issue is the fact that they are using the term “crypto asset securities” because we all know that all of crypto outside of Bitcoin might be classified as a security very soon.
Final Thoughts
We know that every crypto asset is not a security — some cryptos do have the characteristics of a security, but my personal opinion is that these companies with crypto projects should not be punished, and they should be given an incubation period similar to SEC Commissioner Hester Pierce’s Safe Harbor Proposal 2.0 which I believe gave crypto companies about a three-year window to go ahead and register and do things according to law.
But again, after we get this Bitcoin Spot ETF, we have TradFi that has completely immersed itself into the space as they are going to be taking over, making the choices and they are going to be taking away every single opportunity you have to make as much money as ethically as possible.