Gold as an investment

SEC Chair Gensler Again Says Bitcoin Is Not a Security. What About Ethereum?

Sep 24, 2022

Securities and Exchange Commission Chairman Gary Gensler today reaffirmed the SEC's view that Bitcoin is a commodity but refrained from extending the label to any other cryptocurrencies in an interview with CNBC .

Gensler singled out Bitcoin as an example of a crypto asset that should be regulated under the Commodity Futures Trading Commission (CFTC), as he's done previously, but would not comment on other coins or tokens.

"Some, like Bitcoin, and that's the only one, Jim, I'm going to say because I'm not going to talk about any one of these tokens , my predecessors and others have said, they’re a commodity," Gensler said in response to a question from CNBC’s Jim Cramer.

Gensler added, however, that many other “crypto financial assets have the key attributes of a security,” noting that the main similarity between the two is the idea that “the investing public is hoping for a return.”

The regulatory framework surrounding cryptocurrencies and digital assets has centered on the interpretation of which ones function as securities, like stocks, and which ones operate as commodities, like gold. The previous SEC administration believed that both Bitcoin and Ethereum were commodities, but Gensler only mentioned Bitcoin in his latest comments and has previously avoided answering questions about Ethereum specifically.

Prior to Gensler taking the helm at the SEC, the Commission’s leadership had publicly adopted the position that both Bitcoin and Ethereum are not securities—the latter of which with some controversy, considering that Ethereum launched in 2014 through an ICO that would by today’s standards be considered an illegal securities offering.

In 2018, William Hinman, the SEC’s director for the Division of Corporation Finance, said he believed both Ethereum and Bitcoin should be classified as commodities because each cryptocurrency was “sufficiently decentralized” and did not have a central party “whose efforts are a key determining factor in the enterprise.”

Nevertheless, the question of whether Ethereum should today be considered a security continues to be raised. The matter has become a sticking point in the SEC’s ongoing $1.3 billion lawsuit against Ripple over the company's sale of XRP, which the SEC contends is an unregistered security. This might help explain Gensler’s reluctance to comment on Ethereum or any other crypto asset besides Bitcoin.

On the issue of regulating digital assets in the U.S., Gensler today said it’s primarily a dual effort between the CFTC and the SEC but that there’s also overlap with banking regulators in terms of addressing stablecoins. He went on to say that many tokens are “potentially noncompliant” and that “there’s a lot of work to be done to really protect the investing public.”

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