Bitcoin News: The Chairman of Securities and Exchange Commission, Jay Clayton, pointed out reasons why Bitcoin (BTC) is not a security in an interview with Andrew Ross Sorkin at TimesTalk. He further elaborates the commission’s stand on cryptocurrencies and the blockchain.
Clayton starts by clarifying that the rules for securities are divided under two section, the sale of securities and trading of securities. According to him these rules which have stood through the “test of time very well”, need not change in order to adopt a new technology. It has to be the technology that has to fit the rules. He went on to explain the history behind the securities law, which was introduced after the 1929 Wall Street crash. He said:
“If you are going out broadly and you are saying to people you don’t know, ‘give me your money, I will give you a stock certificate or an investment contract, a warehouse receipt or a token […]’, you are expecting some kind of return from that based on my efforts. That’s a security and we need to regulate it.”
Clayton added that such exchanges are subjected to abuse and fraud, thus the need to regulate them arrises and the securities law was introduced. He continued that the people doing a public offering wherein they are raising money from other people are required to go through disclosure rules, provide financial statements and other documents.
The Chairman boasts that these rules have guided the economy to reach its current $20 trillion mark. Coming on to BTC, he states that the digital token can’t be called securities as it is widely distributed and isn’t controlled by a single entity or other people. He continued:
“It’s used as a medium of exchange, you are not looking at the efforts of others to increase your return and that’s why it looks much more like a currency than a security.”
When asked how can the token be differentiated from a commodity, Clayton pointed that commodities like gold and silver, usually have an industrial use apart from being a medium of exchange. He said:
“It’s [Bitcoin] like a currency. I mean it doesn’t have a sovereign backing so it’s different from sovereign currency. It’s designed as a medium of exchange “