In an interview on CNBC this morning, SEC Chairman Jay Clayton reiterated that he does not believe Bitcoin is a security, but suggested that more regulation could still be on the way from other federal agencies.
Clayton told CNBC that Bitcoin more resembles a store of value and a payment mechanism than it does a security, and that “inefficiencies” in current traditional payment mechanisms, both domestically and internationally, are boosting Bitcoin’s growth. But he also warned that as Bitcoin becomes more popular, it could become further regulated as a payment method.
“I think we’re going to see this mature, and I think we’re going to see more regulation around the payments space,” said Clayton.
“We determined that bitcoin was not a security, it was much more a payment mechanism and stored value,” says SEC Chairman Jay Clayton on #btc. “Our current payment mechanisms–have inefficiencies those inefficiencies are the things that are driving the rise of bitcoin.” pic.twitter.com/3r1mxzfgpi
— Squawk Box (@SquawkCNBC) November 19, 2020
The outgoing SEC Chairman was responding to a question from Squawk Box host Andrew Ross Sorkin, who also recently interviewed JPMorgan CEO Jaime Dimon. In that interview, Dimon said Bitcoin is “not [his] cup of tea,” and chalked his skepticism up to government regulation. “My experience with the government is they can regulate whatever they want whenever they feel like it,” he said. “And Bitcoin is worth $200 billion. If it gets bigger and bigger and bigger, it will be regulated.”
Pressed by Sorkin as to why the SEC doesn’t currently regulate Bitcoin, Clayton said, “Well, let’s put it this way: We do not regulate Bitcoin as a security. When people use crypto assets as securities to raise capital for a venture, the SEC regulates that. And what was happening in the ICO craze was people were using ICOs and essentially making public offerings of securities without registering them with the SEC.”
Clayton clarified that the SEC “determined that Bitcoin was not a security, it was much more a payment mechanism and store of value,” before adding, “the government does regulate payments.”
Even if the SEC isn’t regulating Bitcoin, other government agencies, like the IRS and FinCEN (the Financial Crimes Enforcement Network), could potentially expand the ways in which they already do.
Drew Hinkes, a lawyer with Carlton Fields and an adjunct at NYU Stern, told Decrypt that “FinCEN’s guidance treats Bitcoin like ‘funds’ or value that substitutes for currency,” and that early court cases treated Bitcoin like “money, funds, or funds equivalents.” Guidance from the IRS, he said, handles Bitcoin like property for federal income tax purposes, and the CTFC has said that Bitcoin is a commodity.
That the SEC doesn’t treat Bitcoin like a security, and so doesn’t regulate it, isn’t exactly new information—but Clayton has rarely been this explicit about what Bitcoin actually is.
Now if only the rest of the alphabet soup agencies would make up their minds.