The rapid expansion of cryptocurrency markets—currently topping $3 billion—has drawn the ire of regulators who have issued a raft of confusing and complicated guidance and regulations. The most heated debate is whether these assets are currencies (with lighter regulation) or securities (with heavy regulation).
The debate is simple when the asset is being offered as a standalone product. After all, most agree that cryptocurrencies are not securities in that circumstance. The crux of the debate focuses on the precise circumstances that transform these assets from currency into a security subject to regulation by the U.S. Securities and Exchange Commission (SEC). The central question is whether certain statements from the company or intent from investors creates an “investment contract,” a type of security that has a broad definition and inconsistent application.
