There is a section of individuals who insist that choosing not to regard Ethereum and Bitcoin as securities was a poor decision by SEC. But what’s the SEC’s definition of securities?
How are Bitcoin and Ether Different From Other Tokens?
According to William Hinman, the decentralization of Bitcoin and Ether makes them different. There isn’t any third party that both networks are reliant on. The definition of a security given by the SEC isn’t clear-cut. The crypto mogul insisted that additional virtual tokens may ultimately become well decentralized to the point that they are regarded as securities.
However, he may have implied that Ether and Bitcoin investors who joined the crypto scene early may come under scrutiny at some point because both networks weren’t properly decentralized in the beginning. Hence, Hinman’s definition isn’t reliable.
The SEC’s Mistake
For crypto enthusiasts and investors, the SEC’s decision was cheered since the leading virtual currencies will be rescued from the SEC’s rigorous oversight. However, some believe that the SEC may have missed a good opportunity to offer validation to the burgeoning asset class by choosing to regulate it as a security.
The anonymity of digital currency transactions is usually what makes enthusiasts use Bitcoin; however, it is the same anonymity that makes the SEC’s oversight over cryptocurrencies extremely difficult. Investors won’t be better protected should they be defrauded. A recently released study found that cybercriminals have made away with 1.1 billion USD worth of virtual currencies since 2018 began.
The University of Texas recently released the result of a study about digital currencies. They found that Tether was used on Bitfinex exchange last year to influence Bitcoin’s rise to 20,000 USD per token. By not classifying Bitcoin or Ether as securities thus opening the way for additional tokens to escape being tagged as securities, the securities commission has given anonymity, volatility and prospective manipulation free reign.