Jay Clayton, the Chairman of Securities and Exchange Commission, recently spoke about the reasons Bitcoin is not a security and the history behind the commission’s securities law, during an interview with Andrew Ross Sorkin at TimesTalk. He also spoke about the commission’s current stance on the blockchain and cryptocurrency space.
Clayton stated that the securities rules, which is divided into two – offering of sale of securities and trading of securities, have stood through the “test of time very well”. He stated that they were not going to change the rules in order to adopt a new technology, whereas, the technology has to fit the rules, adding that the blockchain technology has incredible promise for adding efficiency to the current marketplace.
He went to speak about the history behind the securities law, stating that it was introduced after the 1929 Wall Street crash. The commission said:
“If you are going out broadly and you are saying to people you don’t know, ‘give me your money, I will give you a stock certificate or an investment contract, a warehouse receipt or a token […]’, you are expecting some kind of return from that based on my efforts. That’s a security and we need to regulate it”
Clayton stated that this kind of an exchange is subjected to abuse and fraud, and that it was one of the reason the securities law was introduced. This was followed by him stating that the people doing a public offering wherein they are raising money from other people are required to go through disclosure rules, provide financial statements and other documents. The Chairman added that they created a $20 trillion economy because of these securities rules.
He further spoke about the reason Bitcoin is not treated as a securities transactions. Clayton stated that the reason is that Bitcoin is widely distributed and that it was not controlled by a single entity or other people. He continued to say:
“It’s used as a medium of exchange, you are not looking at the efforts of others to increase your return and that’s why it looks much more like a currency than a security.”
Succeeding this, the Chairman was asked how it could be differentiated from a commodity. To which, Clayton stated that commodities like gold and silver, usually have a industrial use apart from being a medium of exchange. He said:
“It’s [Bitcoin] like a currency. I mean it doesn’t have a sovereign backing so it’s different from sovereign currency. It’s designed as a medium of exchange “