SEC names nine crypto-tokens it considers securities as part of ex-Coinbase fraud charges

The Securities and Exchange Commission (SEC) has listed nine cryptocurrencies it says are securities. This came within charge and the arrest of a former Coinbase employee and two others in the fraud. Assets were: AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, KROM. Each was mentioned in connection with alleged insider trading.

"Our message is clear: fraud is fraud, whether it occurs on the blockchain or on Wall Street," the SEC wrote.

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Most cryptocurrencies are securities

This is one of the few instances where the SEC has called specific cryptocurrencies securities; over the years, the agency has provided few details.

Initially, former SEC Chairman Jay Clayton said that Bitcoin is not a security. Then former SEC Director of Corporate Finance William Hinman said that Ethereum does not exhibit the characteristics of a security. Current SEC Chairman Gary Gensler recently undermined this second view when he said that Bitcoin is the only token that can be called a commodity. The SEC also sued Ripple for allegedly selling unregistered securities referencing the XRP token.

Today's indictment suggests that the SEC largely takes the view that most cryptocurrencies are securities.

"We are interested in the economic reality of the offer," said Gurbir Grewal, director of the SEC's division of enforcement. “In this case, these facts establish that the named crypto-assets were securities and, we allege, the defendants engaged in typical insider trading prior to their listing on Coinbase. We assure you that we will continue to ensure a level playing field for investors.”

Coinbase fires back

Coinbase responded to the SEC filing of its own blog post. She said laws in the US have not kept pace with the digital world and need to be fixed.

“Crypto assets that are securities need an updated set of rules to help guide safe and efficient practices. Non-cryptocurrency assets need assurance that they will be outside these rules. Anything else will impact innovation and ultimately consumers,” Coinbase said.

She submitted petition SEC to create rules for what it describes as "digital asset securities."

"Adopting such comprehensive rules will require a real examination of how crypto works differently from traditional financial securities and what provisions would actually protect investors who trade in crypto securities," Coinbase said, adding:

If the SEC encourages cryptocurrency adoption while providing reasonable regulation, the US would reap the rewards. If they don't, others will—and the U.S. may not be able to catch up.

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All content in this article is for informational purposes only and does not in any way serve as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.