The U.S. Securities and Exchange Commission (SEC) has recently made a surprising clarification regarding its use of the term “crypto asset securities” in relation to digital tokens. The SEC, known for its scrutiny of crypto companies, stated that it never intended to suggest that the tokens themselves are securities.
This revelation came to light during the SEC’s lawsuit against crypto exchange Binance. In an amended complaint, the SEC explained that when it refers to “crypto asset securities,” it is not categorizing the digital assets as securities. Instead, the term is used to encompass a broader scope of contracts, expectations, and agreements associated with the tokens’ sale. The SEC described it as a mere acronym and emphasized that it does not imply that the tokens are securities.
Despite this explanation, the crypto community has expressed skepticism towards the SEC’s stance. Jake Chervinsky, Chief Legal Officer at Variant Fund, voiced his disbelief, highlighting the extent of manipulation involved. Paul Grewal, Chief Legal Officer at Coinbase, criticized the SEC for labeling XRP as a “digital asset security” in its complaint against Ripple, raising questions about the agency’s consistency.
Stuart Alderoty, Chief Legal Officer at Ripple, echoed these concerns, referring to the SEC’s position as a “twisted trap full of contradictions.” Alderoty questioned whether the SEC is acknowledging that the term “crypto asset security” is fabricated and whether the agency requires evidence of a bundle of contracts, expectations, and understandings to prove the classification.
In response to the backlash, the SEC announced that it would refrain from using the term “crypto asset securities” in its lawsuit against Binance to prevent further confusion. The agency expressed regret for any misunderstandings caused by its terminology.
It is essential to note that the information provided is not intended as investment advice. The SEC’s clarification regarding the term “crypto asset securities” has sparked debate within the crypto community, highlighting the need for clear and consistent regulatory language in the evolving landscape of digital assets.