For some time now, there has been an intense debate on whether some cryptos like Bitcoin should be classified as securities. However, the opposing side seems to be scoring huge wins especially since the US SEC (Securities and Exchange Commission) is taking their side. The latest of these incidents involves a company named Cipher.
Apparently, Cipher Technologies Bitcoin Fund tabled an application request to SEC to register the company. However, SEC declined to register Cipher, a move that many may now see as SEC’s strong stand in the debate.
Bitcoin Is Not A Security
According to Cipher, Bitcoin passes the Howey test and qualifies as a security that can be used as an investment. The Howey Test is a framework adopted in April and is used to analyze digital assets.
However, SEC doesn’t seem to buy this argument. According to SEC, Bitcoin investors and traders don’t rely on any professional help from other people to make a profit from their crypto investments. In this case, Cipher doesn’t meet the requirements of a true investment company, especially given that the company plans to invest all its assets in Bitcoin.
Issues Would Arise
While SEC’s decision to decline Cipher’s move may work to settle the debate, there’s still a curious stance as to what would happen if every Bitcoin were to be classified as a security. While giving reasons for Cipher’s application rejection, SEC sought to address the issue of Bitcoin as a security.
First off, classifying Bitcoin as security would make the digital asset unregistered yet publicly available security. That’s not something any regulatory authority would want to dabble in.
Also, registering an investment company that’s focused on this particular asset would make the company the sole underwriter of Bitcoin. SEC also noted Cipher’s failure to fully comply with investor protection policies as another reason for rejecting its application.