Bitcoin Is Not Crypto, The SEC Announces

Talk to a bitcoin maximalist – someone who believes that bitcoin is the only digital asset with innate value – and, more likely than not, they’ll tell you the world’s oldest cryptocurrency is, in fact, ‘not crypto’ at all. The refrain can be confusing: clearly, bitcoin pioneered the use of cryptography – an ultra-secure type of encryption – with the aim of creating a digital currency.

Bitcoin is the archetypal crypto. And yet, in the context of how the digital asset marketplace has evolved since 2009, when bitcoin was created, it’s easy to see why maximalists distance themselves from the more generic term. Today, there are thousands of copycat cryptos.

It’s true that a few are experimenting with innovative technologies – algorithms that bitcoin may, one day, absorb into its code – but the vast majority can be dismissed as scams and get-rich-quick-schemes. PROMOTED To many in the space, crypto has become a euphemism for fraud and exploitation – the opposite of the autonomous digital cash Satoshi Nakamoto set out to create. The US Securities and Exchange Commission (SEC), America’s financial regulator, shares this concern and has tried to protect consumers from unscrupulous players in the cryptosphere. Its main weapon is an offensive defense: clipping the wings of dodgy cryptos by attacking the exchanges, or digital marketplaces, where they’re traded.

That’s why the SEC sued Binance and Coinbase last month: fewer consumers will be left out of pocket, the regulator hopes, if it becomes harder to buy and sell these speculative instruments. The SEC’s strategy hinges on a claim that most cryptos can be classified as “securities”, or financial instruments that give the holder a tradable stake in a profit-making enterprise. As such, any entity facilitating their trade needs to jump through certain hoops in order to stay on the right side of US Securities law. If they fail to do so, they face lawsuits, fines and potential dissolution.