If the SEC decides that crypto currencies are securities, would that mean that no US citizen could ever buy Crypto again?
As I understand it, only registered securities can be traded in the USA. But how would a cryptocurrency be registered? Would Vitalik Buterin shoulder his rainbowunicorn bag, go to the SEC and say "Uhm, in 2015, I had this idea of a new protocol that kinda forms a distributed computer. And it has this thing called eth that is the gas for this, uhm, computer. And somehow people now People value this gas at $200B. Can I haz make it a security?".
The SEC has had a consistent position. The Howey test applies.[1]
Other than Bitcoin, which the SEC recognizes as not having an "issuer", crypto currencies would have to be registered by their issuer as securities. This means filing an S-1 form. An S-1 form tells who's behind the issue, their backgrounds, where the money is going, the business plan, and balance sheets. All filed under penalty of perjury. Every publicly traded company in the US has been through this process.
Any US registered broker can trade any registered security.
There are lots of restrictions that crypto companies don't like. You can't self deal. You can't wash trade. You can't clear your own transactions. Issuers, brokers, clearing services, and exchanges are different organizations. FBX argued to Congress that they didn't need all that separation of function. Now we know that was because it would have interfered with stealing the customers assets.
So you should be fully supportive of Coinbase and other crypto companies asking the SEC to show their work and publish an official statement with supporting evidence of why they believe Howey applies.
If the SEC wants to regulate a currency (currently the domain of the CFTC and OCC) they either need to explain why they believe money is a security or have the Congress explicitly grant them the authority.
The USDA for example can't all of the sudden decide they want to regulate forests because an edible plant might grow there.
> If the SEC wants to regulate a currency (currently the domain of the CFTC and OCC) they either need to explain why they believe money is a security
Factually, they don't. They just have to issue the regulations and enforce them, and if people, disagree, then they have to explain their rationale in the ensuing litigation.
Just as Congress doesn't need to explain their Constitutional authority when passing a law, either.
> Just as Congress doesn't need to explain their Constitutional authority when passing a law, either.
The House requires that, as a rule of the House.[1] Which is why, when you look up bills today, you'll see a "constitutional authority statement". It's mostly a reminder that, unlike state legislatures, Congress does not have a general police power. Most of Congress's regulatory authority derives from its power to regulate interstate commerce, which is pretty much everything commercial now.
> The House requires that, as a rule of the House.
Sure, but that is a self-imposed rule that is as easy for the House to change as it is for the House to pass anything else, so its effectively discretionary.
> Just as Congress doesn't need to explain their Constitutional authority when passing a law
They don't because it is clearly written down in checks notes the constitution.
Factually, our government doesn't operate on whims and feelings or work it out in the courts later. All laws must show a clear linage to the enumerated powers of congress.
> They don't because it is clearly written down in checks notes the constitution.
Often, it is not. But they don't have to (except as a fairly recent, self-imposed rule of the House of Representatives) explain any argument that it is, in advance, nor even when they do is the government bound to only that advance argument on its Constitutional justification.
Similar, regulatory agencies , while they tend to identify their statutory authority when making regulatory actions, aren't required to justify their claims of authority in advance. When they are contested, it is resolved in the courts, whether its Congress or executive branch regulators.
> Factually, our government doesn’t operate on whims and feelings or work it out in the courts later.
Factually, that’s exactly what our government does a lot of the time.
Ideally (in many people’s view) that’s not what it should do, but facts and ideals are different things.
The SEC has powers delineated by the legislation that creates it too.
Again, they aren't acting with omnipotent power. Push come to shove, they'll go to court where they will explain their position. Coinbase can try to counter their arguments then if they wish to.
It’s not at all clear the CFTC (lobbied hard by crypto companies and which has correspondingly been quite open to lightly regulated crypto) has jurisdiction over crypto over the SEC.
As I understand it, only registered securities can be traded in the USA. But how would a cryptocurrency be registered? Would Vitalik Buterin shoulder his rainbowunicorn bag, go to the SEC and say "Uhm, in 2015, I had this idea of a new protocol that kinda forms a distributed computer. And it has this thing called eth that is the gas for this, uhm, computer. And somehow people now People value this gas at $200B. Can I haz make it a security?".