SEC President Says Cryptocurrencies Can Be Securities

English Sep 16, 2022

Gary Gensler, chairman of the SEC recently stated that cryptocurrencies that use proof-of-stake technology, unlike Bitcoin that uses proof of work, can be securities.

Gary stated that those native blockchain assets that use proof-of-stake allow holders to passively earn returns, can pass the Howey test.

The Howey test is a way of determining whether the provision of a service or asset qualifies as an "investment contract".

Today, there are many of these assets on the market and most of them are among those with the highest market value. Some familiar names of cryptocurrencies using such technology are Cardano, Solana and, since the recent The Merge, Ethereum.

Under the test, an asset is considered an “investment contract” if investors donate their money to fund a company with the intention of profiting from their efforts.

Ethereum this week moved from being a proof-of-work to a proof-of-stake currency.

If the SEC chairman's interpretation is correct, then Ethereum's recent change would mean that the asset is an "investment contract" and therefore subject to securities laws.

Garry declined to comment specifically on Ethereum, but said he believes Bitcoin is not a security. The SEC chairman did not specifically mention Ethereum, or any other currency, when commenting on staking and proof-of-stake coins.

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Morel Hernandes

Writer passionate about politics, economics, blockchain and crypto-currencies.