Bitcoin, the pioneer of the cryptocurrency world, has had its own unique journey with the SEC. As the first and most prominent digital asset, Bitcoin has often been the center of the SEC’s attention.
Fortunately for MicroStrategy and all the other Bitcoin Maxis, the SEC does not classify Bitcoin (BTC) as a security, primarily because it was not issued in an Initial Coin Offering (ICO) or any other type of fundraising event.
Instead, Bitcoin was mined, and its value is not tied to the efforts of a particular entity or group, which gives it a pass under the Howey Test ruling. This classification, or lack thereof, has allowed Bitcoin to operate in a different regulatory space than other cryptocurrencies.
Before getting too excited, remember that this does not mean Bitcoin is entirely free from the SEC’s oversight. The SEC has been actively regulating Bitcoin-related investment products, such as Bitcoin Exchange-Traded Funds (ETFs).
In its ongoing mission to regulate and crush the cryptocurrency market, the SEC has identified several coins that it considers to be unregistered securities. This classification is based on the Howey Test, a legal standard used to determine whether a transaction qualifies as an “investment contract” or security.
In June 2023, the SEC identified 19 tokens as unregistered securities in lawsuits against crypto exchanges Binance and Coinbase. These altcoins have suffered since the press release, which caused a sharp selloff and led to a significant slump in their combined market value.
In case you missed it, these are the coins classified as securities by the SEC:
Solana (SOL), Cardano (ADA), Polygon (MATIC), Cosmos (ATOM), Binance Coin (BNB), Binance USD (BUSD), The Sandbox (SAND), Decentraland (MANA), Algorand (ALGO), Chiliz (CHZ), Near (NEAR), Flow (FLOW), Internet Computer (ICP), Voyager Token (VGX), Dash (DASH), Nexo (NEXO), COTI (COTI), Filecoin (FIL) and Axie Infinity (AXS).
The big question that remains to be answered is whether or not Ethereum (ETH) will eventually be labeled as a security.
While it might cause some alarm bells for crypto investors, it’s important to remember that the SEC’s classification of a crypto asset as a security does not necessarily mean the coin is illegal or fraudulent. It just means that the coin must comply with securities laws, including registration requirements and disclosure obligations.
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