(qz) -- Cryptocurrency regulation can evolve as a project matures. At least that’s the view of Jay Clayton, the chairman of the US SEC, who suggested in a recent letter to a congressman that a digital coin can transform from security into a commodity.
Clayton’s newly revealed opinion matters, because for US cryptocurrency investors, the distinction between a security and a commodity is critical. The nature of the asset determines whether the SEC or the Commodity Futures Trading Commission has regulatory jurisdiction. If a token is deemed security, and thus regulated by the SEC, then its creators can be liable for holding an illegal, unregistered securities offering. Punishments and fines can set a project back, or quash it entirely. Consequently, crypto developers are eager to avoid the security designation.
Clayton’s newly revealed opinion matters, because for US cryptocurrency investors, the distinction between a security and a commodity is critical.
The nature of the asset determines whether the SEC or the Commodity Futures Trading Commission has regulatory jurisdiction. If a token is deemed a security, and thus regulated by the SEC, then its creators can be liable for holding an illegal, unregistered securities offering. Punishments and fines can set a project back, or quash it entirely. Consequently, crypto developers are eager to avoid the security designation.
“I agree that the analysis of whether a digital asset is offered or sold as a security is not static,” he writes. “A digital asset may be offered and sold initially as a security because it meets the definition of an investment contract, but that designation may change over time if the digital asset later is offered and sold in such a way that it will no longer meet that definition.”
Clayton appears to be leaving the door open for ether to be regulated as a commodity, but by declining to comment on it directly, he’s leaving the currency in regulatory limbo. Ether investors should put their champagne back on ice.
