SEC Claims ‘Crypto Asset Security’ Term Was Only Shorthand

The U.S. Securities and Exchange Commission (SEC) has stated that it used the term ‘crypto asset security’ as a linguistic shortcut and not as a specific identification of any particular token as a security.

The clarification came as a footnote within the agency’s proposed amended complaint against Binance about the latter’s sale of these assets and the broader set of contracts and understandings related to these sales.

The SEC pointed out that it apologizes for any inconvenience that may have been caused and that it shall not use the term in the future. It has attracted much criticism from the major players in the cryptocurrency industry, especially the SEC’s credibility.

The agency pointed to its position in the Telegram case but said its language might have confused. SEC’s decision has created more doubts regarding the SEC’s approach toward digital assets, with many people citing inconsistencies in previous statements.

SEC’s Shifting Crypto Terminology Sparks Backlash

The SEC’s effort to explain its stance further has attracted a lot of backlash from significant players in the crypto space. In its motion to dismiss, Coinbase’s Chief Legal Officer, Paul Grewal, noted that the SEC had once described XRP as a cryptocurrency in its complaint against Ripple Ltd.

This statement contrasts with the current position of the SEC, which stated that “crypto asset security” was not intended to classify each token as a security. Also, Ripple’s Chief Legal Officer Stuart Alderoty complained that the agency has been taking contradictory stances.

The SEC’s problem was to prove that some of these digital assets fall under the Howey test to determine that an investment contract is a security. Galaxy Digital’s CEO said that the SEC’s changing language erodes its authority in regulating the crypto market.

SEC Targets Binance in Crypto Lawsuit

The SEC has been escalating its actions against the crypto industry, and its lawsuit with Binance is among its primary targets. The agency said that Binance was offering and selling digital assets that are supposedly securities according to the Howey test.

Some of the SEC’s recent enforcement activities also involve eToro and Galois Capital, among other companies. The agency accused both firms of conducting their affairs unlawfully regarding their crypto businesses as it continued to show its stand on digital assets.

Still, these actions have led to the continuing controversy within the crypto community about the effectiveness and lack of clarity of the present legal framework.

Crypto Industry Calls for Clearer Regulations

The SEC has received widespread backlash for its regulation of cryptocurrencies, especially from the current chair, Gary Gensler. Gensler has been quite vocal in the past, saying that the majority of cryptocurrencies should be regulated as securities.

He also called for enhanced regulation of the platforms that operate in the crypto industry. Still, crypto firms pointed out that the current legal framework does not reflect the specifics of digital assets, which results in difficulties with compliance.

Market participants have repeatedly insisted on creating a more sophisticated legal regime appropriate for the unique nature of blockchain and cryptocurrencies. They assert that the current framework needs to offer the much-needed direction on how digital assets can comply with the SEC regulations.

The SEC will continue with the enforcement actions, and the relationship between the agency and the cryptocurrency sector will remain strained. The SEC’s definition of ‘crypto asset security’ may indicate the Commission’s changing approach to regulating crypto assets.

Nevertheless, industry participants still have doubts about whether the agency’s actions are consistent with its declared goals. The current legal proceedings against Binance and other companies will probably define the further evolution of cryptocurrency regulation in the United States.