Why is Bitcoin not a security?
Bitcoin does not meet this criteria because it does not have any issuer or promoter who controls its supply or value. It is also decentralized and distributed among its users who validate transactions and secure the network through proof-of-work mining.
Current SEC Chair Gary Gensler has singled out bitcoin as not being a security and so has said that it does not meet the definition of a security under that test.
However, the exchange argues that these crypto tokens do not qualify as registered securities because they are not offered to institutional investors. Moreover, Coinbase states that they were never required to be a registered exchange when they made their official registration in 2021.
As mentioned earlier, Gensler reiterated the SEC's stance in an interview with CNBC in July 2022 that Bitcoin is not a security but a commodity that falls under the Commodity Futures Trading Commission's jurisdiction.
Among other things, Bitcoin enables the citizens of a country to undermine government authority by circumventing capital controls imposed by it. It also facilitates nefarious activities by helping criminals evade detection.
If the SEC determines a cryptocurrency or token is a security and falls under its regulatory purview, this will have far-reaching implications for those involved. The issuer may face stricter regulatory requirements and compliance burdens.
If a cryptocurrency is considered a security, holders can earn from price growth while the offering company will raise capital. However, the cryptocurrency will run several risks that all securities face; market, liquidity, regulatory, credit, horizon, inflation risks, etc.
Ether has long been treated as a commodity by state and federal regulators, including the Commodity Futures Trading Commission (CFTC). Designating it as a security would have a massive impact on crypto markets, drastically changing how (and whether) the currency and others like it are traded in the U.S.
Despite its use for buying goods and services, there are still no uniform international laws that regulate Bitcoin. Many developed countries allow Bitcoin to be used, such as the U.S., Canada, and the U.K. Several countries, including China and Saudi Arabia, have made it illegal to use Bitcoin.
If the SEC wins, it will be all but impossible for the crypto giant to do business in the U.S. The SEC alleges that Coinbase has been operating an unregistered securities exchange, broker and clearinghouse, and combining those functions into one platform.
Why do cryptos not want to be securities?
US regulators including the SEC agree that Bitcoin, which is by far the largest digital asset, isn't a security. It was started by an unknown person or persons going by the pseudonym Satoshi Nakamoto and does not exist as a way to raise money for a specific project.
Yes, the IRS can track cryptocurrency, including Bitcoin, Ether, and a huge variety of other cryptocurrencies. The IRS does this by collecting KYC data from centralized exchanges.
Bitcoin regulation can vary on both the national and local levels, depending on the country or geographical area. In the U.S., the IRS treats cryptocurrency as property, while the CFTC considers it a commodity.
Due to the decentralized nature of bitcoin, the government no longer has control over the monetary system. The government loses control over monetary policy because the underlying technology of bitcoin forbids the use of any central authority for any transaction. Thus, some economies do not like bitcoin.
Trying to enforce a prohibition on something digital and borderless like Bitcoin is entirely impractical. Bitcoin would be far more challenging for governments to ban than US dollars or a plant. Further, many popular Bitcoin wallets use a 12-word phrase as a way to recover your funds.
For a central bank, if the actors involved in valuing and distributing the currency are beyond your control, then you've essentially ceded control of monetary policy to those actors and their activities. The system will become susceptible to rapid inflation or deflation.
The only digital asset which has been clearly defined as not being a security is Bitcoin (BTC). Just Bitcoin itself isn't considered a security. Bitcoin Cash (BCH), Bitcoin SV (BSV), and Wrapped Bitcoin (WBTC) haven't been defined in any way, despite ostensibly being the same concept.
Yes, if someone has access to your Bitcoin wallet, they can steal your money. The Bitcoin wallet is a software application or hardware device that stores the private keys to your Bitcoin addresses.
Know that crypto deposits are not FDIC insured, period.
The Howey Test refers to the U.S. Supreme Court case for determining whether a transaction qualifies as an “investment contract.” If a transaction is found to be an investment contract, it's considered a security.
Who owns Bitcoin?
Bitcoin remains open-source, meaning that no one has the power to own or control it in its entirety. Its design is public and it is open for anyone to participate. Bitcoin was a response to the Great Financial Crisis, which showed that even the world's biggest banks can fail.
Bitcoin is a risky investment with high volatility, and should only be considered if you have a high risk tolerance, are in a strong financial position already and can afford to lose any money you invest in it.
“As per the Securities Exchange Act, a security is classified as an asset that is a financial asset that has future expectation of gains and has a centralized entity like Howie. None of these factors exist in DOGE.”
Bitcoin is the more established and mainstream of the two, which makes ETH just a touch riskier. As with most investments, it's possible Ethereum's higher risk brings with it potential for higher rewards.
Ethereum, it depends entirely on your requirements. While Bitcoin works better as a peer-to-peer transaction system, Ethereum works well when you need to create and build distributed applications and smart contracts. The choice is entirely up to you to choose a winner between Bitcoin vs. Ethereum.
