SEC Chair Says Bitcoin Is Not A Security

SEC Chair Jay Clayton has clarified that bitcoin is not a security. “Cryptocurrencies are replacements for sovereign currencies…[they] replace the yen, the dollar, the euro with bitcoin. That type of currency is not a security,” he said in an interview with CNBC. His assessment is important because the debate around the regulation of cryptocurrencies is often focused on their status as securities. (See also: Are There SEC Guidelines On ICOs?)

But Clayton held off on commenting about the case for ethereum and ripple, the second and third most valuable cryptocurrencies, being classified as securities. At a conference in April, former CFTC chair Gary Gensler had come down hard on XRP and said there was “a strong case” to classify it as a security. (See also: ICO Tokens Are Securities: Former CFTC Chair).

Bitcoin, which has never sought public funds to develop its technology, does not pass the Howey Test used by the SEC to classify securities. 

No Reprieve For Ethereum Tokens   

Bitcoin may be in the clear, but ethereum’s tokens, which have been embroiled in an acrimonious debate regarding their status, were not granted a similar reprieve. Critics charge these tokens with masquerading as utility tokens when they are, in fact, securities. 

In his CNBC interview, Clayton made it clear that his agency was still intent on regulating tokens. “A token, a digital asset where I give you my money...[in exchange for] providing a return…that is a security and we regulate that. We regulate the offering and trading of that security,” he said. Clayton’s statement is a reiteration of the agency’s crackdown actions in recent times. (See also: SEC Warns Investors About Scam ICOs). 

Clayton has been leading the charge for regulatory action against fraudulent tokens. Based on his stance during the interview, it would seem that he is not ready to back down anytime soon. "We are not going to do any violence to the traditional definition of security that has worked for a long time,” he said. “We’ve been doing this a long time, there’s no need to change the definition.” According to him, the U.S. securities market, which is the “envy of the world,” was built following the same rules. The reaction to his latest interview was not positive.

Investing in cryptocurrencies and Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin and litecoin.

Do you have a news tip for Investopedia reporters? Please email us at
Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.