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SEC wants key upgrades in crypto markets before approving bitcoin ETF

Clayton also had a message for those issuing initial coin offerings: Chances are, it’s subject to SEC laws.

“You should start with the assumption that you’re starting with a securities offering,” Clayton said.

In June, Clayton made it clear that the agency won’t bend the rules for cryptocurrency when it comes to defining what is or what isn’t a security. He told CNBC at the time that the U.S. has built a $19 trillion securities market that’s “the envy of the world” following the current rules.

Whether an asset is a security right now follows the “Howey Test.” The ruling comes from a 1946 U.S. Supreme Court case that classifies a security as an investment of money in a common enterprise, in which the investor expects profits primarily from others’ efforts.

The SEC has said explicitly that bitcoin and ether are treated as commodities and therefore aren’t subject to that test. But all other cryptocurrencies are still seen by the SEC as securities and need to register with the agency.

The SEC has penalized multiple cryptocurrency projects that failed to do so. Earlier in November, the agency announced its first civil penalties against founders who did not register new coin offerings, adding to its crackdown aimed at abuses and outright fraud in the growing digital industry.

Bitcoin, the world’s largest cryptocurrency, was trading near $3,760 Tuesday, down more than 80 percent from its all-time high in December, according to data from CoinDesk.


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