Big Win for Crypto? SEC Admits Error on Digital Asset Classification

The United States Securities and Exchange Commission (SEC) has been a major source of headwinds for the mainstream adoption of digital assets and web3 protocols. While its primary purpose is to enforce the law against market manipulation, the agency has been accused of overstepping its bounds regarding the cryptocurrency industry. 

Furthermore, the crypto community in the United States has raised concerns over colliding legal mandates between the SEC and the Commodity Futures Trading Commission (CFTC).

US SEC Backs Down on Crypto Asset as Securities

In the amended complaint against the Binance exchange, the US SEC highlighted that it regrets any confusion it may have invited by falsely and repeatedly stating that crypto assets are securities. Furthermore, the SEC admitted that although crypto assets may be offered as securities through initial coin offerings (ICO), they tend to evolve into commodities over time.

For instance, the US SEC agreed that Ethereum has since evolved from a security into a commodity crypto asset, thus approving the spot Ether ETFs.

The SEC’s recent statement coincided with the settlement with eToro US, whereby the agency announced that the exchange had agreed to pay a fine of $1.5 million for facilitating the trading of certain crypto assets as securities.

Better than Nothing

The crypto community in the United States, led by Coinbase CLO Paul Grewal and Ripple’s CLO Stuart Alderoty, was largely relieved from the SEC’s position on crypto assets. According to Alderoty, the US SEC has been heavily entangled with political ambitions. 

Already, the SEC Chair Gary Gensler is under investigation by top Republican lawmakers for engaging in suspected political favoritism in his hiring practices.

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