As you all know, the recent decision by the Securities and Exchange Commission (SEC) to declare BNB, BUSD, SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS, COTI, CHZ, NEAR, VGX and NEXO securities has been a shocking news for the entire crypto market. This decision is a major update, and it raises the question of which other coins or tokens could be next.
According to Cointelegraph:
The total number of cryptocurrencies the United States securities regulator has accused to be a “security” has now reached an estimated 68, after adding a few more from its lawsuit against crypto exchanges BINANCE and Coinbase.
The SEC has not yet released any guidance on which other coins or tokens it may consider to be securities. However, there are a few factors that the SEC may consider when making its determination. These factors include:
- The purpose of the coin or token: Is the coin or token being used to raise money for a company or project?
- The rights that the coin or token gives holders: Do holders of the coin or token have any ownership rights in the company or project?
- The level of control that the issuer has over the coin or token: Does the issuer have the ability to change the terms of the coin or token or to revoke the tokens?
Based on these factors, there are a few other coins or tokens that could be considered to be securities. These include:
- Exchange Tokens Like CRO, KCS, OKB and HT, for the same reasons as BNB.
- Stablecoins USDT, USDC and TUSD, for the same reasons as BUSD.
- Infrastructure coins AVAX and FTM, for the same reasons as SOL and MATIC.
On the contrary, the tokens that could be declared securities in theory are utility tokens, i.e., tokens that give holders access to a particular service. For example, a utility token could give holders access to a decentralized application. Utility tokens are not considered securities because they do not represent an investment in a company or project.
Here are some examples of utility tokens:
- UNI is a utility token that gives holders governance rights over the Uniswap protocol, a decentralized exchange that allows users to swap tokens without the need for a central authority.
- BAT is a utility token that rewards users for viewing privacy-respecting ads. BRAVE is a web browser that blocks ads by default. When users opt-in to see privacy-respecting ads, they are rewarded with BAT tokens.
Furthermore, although the SEC has not yet made a final determination on whether Bitcoin (BTC) is a security, the Commodity Futures Trading Commission (CFTC) has stated that it does not consider Bitcoin to be a security.
Last but not least, the SEC has not yet made a final determination on whether Ethereum (ETH) is a security, but it has said that it is considering the issue. The SEC's decision on whether Ethereum is a security will likely hinge on whether it meets the definition of a security under federal law. The Howey Test is a four-part test that is used to determine whether an investment is a security. The Howey Test asks the following questions:
- Is there an investment of money?
- Is there an expectation of profits from the investment?
- Are those profits to come from the efforts of others?
- Is the investment in a common enterprise?
Ethereum meets the first three prongs of the Howey Test. Investors put money into Ethereum, they expect to make a profit, and those profits come from the efforts of others (such as validators and developers). However, it is unclear whether Ethereum meets the fourth prong of the Howey Test, which asks whether the investment is in a common enterprise.
In summary, if you are considering investing in any crypto, you should also be aware that the SEC could declare any crypto to be a security at any time.
Disclaimer: This article is for informational purposes only and should not be construed as financial advice.
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