In a recent interview with CNBC, SEC Chair Gary Gensler reaffirmed that that Bitcoin is not considered as a security under U.S. law, continuing to categorize it as a commodity due to its decentralized nature. However, the confusion surrounding the regulations still lingers as the SEC’s legal battle with Ripple revolves around the fact that Ripple in fact categorize as a security by the SEC. This contradiction has left many wondering about the regulatory distinction being made.
💥 JUST IN: 🇺🇸 SEC Chair Gary Gensler says #Bitcoin is not a security.#CryptoNews pic.twitter.com/3OlGqv7twf
— Amonyx (@amonbuy) September 26, 2024
According to Gensler and the SEC, Bitcoin does not meet the criteria to be categorized as a security as it does not pass the Howey test. In order to pass the Howey Test, the asset has to have an investment contract, where money is invested in a shared business or project(common enterprise), with the expectation of earning profits from the efforts of work or others. Since Bitcoin works as a decentralized network, it is classified as a commodity, much like gold.
Why is Ripple Deemed as a Security?
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On the contrary, Ripple has been in SEC’s crosshairs because the regulatory body argues that Ripple Labs sold XRP tokens to raise capital, with the expectation of profits tied to company’s effort. Ripple’s centralized issuance and development led to the classification of XRP as an investment contract, classifying it as a security under Howey Test.
Gensler’s Regulatory Confusion and its Implications
These contradiction have caused a great deal of chaos and confusion within the crypto market with respect to the crypto regulations. The community members argue that the current framework does not address the nuances of the blockchain technology which has led to inconsistent regulatory decisions like above.
Gensler’s statement further adds to the uncertainty, as many wonder if projects similar to Ripple may also be classified as securities. The pressure to have clearer guidelines on the regulators is immense as the community demands a clear stance on what constitutes a security vs. commodity.
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