Hung Jury: The SEC Delays Ruling on Cryptocurrency
The US Securities And Exchange Commission (SEC) has delayed their decision about whether cryptocurrencies are securities or not. This has a very significant effect on cryptocurrency.
What is the SEC?
The SEC is a regulatory body for securities. All securities must be registered as such with the SEC. Like all legal entities, the SEC is playing catch up with cryprocurrency. The US SEC was supposed to come out with its decision about cryptocurrency already, but instead has decided to delay their decision for a future day.
Security vs Asset Class
How cryptocurrency is classified is a tricky and complex situation. There are basically 2 possibilities, either a cryptocurrency is a security or it falls under an asset class.
As mentioned, a security has to be registered with the SEC. However because cryptocurrency is hard to define, the SEC is having a hard time coming to a conclusion. Some cryptocurrencies might be clearer to categorise than others. What is the use of the cryptocurrency? This is really the fundamental question to answer. While some people invest, others trade, and yet others transfer money or buy and sell goods and services using the same, it is more complicated because this could be with the same and/or different cryptocurrencies. Therefore for one group of people a particular cryptocurrency might fall under a security, while for another group, it might be an asset. The other possibility is that different cryptocurrencies might fall under different categories. For example, a cryptocurrency might not be registered on any exchange and might be exclusively used as an asset. Ether makes use of smart contracts, which might be a category of its own. What about DApps (decentralized Apps), like CryptoKitties? These details probably make the SEC’s decision a lot harder to tackle.
Effect of the Delayed Decision
The cryptomarket reacted negatively to the news of the delay according to Bloomberg. Bitcoin was down and so were altcoins. Given this is inconsequential for hodlers (those who hold cryptocurrency as long term investors), it seems like just another chapter in the crypticurrency saga.
For day traders it is a different story altogether. It is only good for bears who have gone short on their trade. Bulls will probably have their day in the sun again though, according to Bloomberg, but it is worrying because of the recent trend. Peaks, or recoveries, have not been so strong lately. Hodlers have to hold strong (lol).
Conclusion
Volatility is not foreign to the cryptomarket. However the SEC has a strong influence. On the verge of a decision about the status of cryptocurrency, the SEC delays. Investors watch, speculatively. Cryptomarkets react and hopefully settle. Time is running out for those whose nerves cannot hold the tension. Eventually the SEC has to rule and finalize. This too will have a significant impact on cryptocurrency and its future. More red tape will probably be necessary for all, or at least, some already established cryptocurrencies. This will have a ripple effect on those who own, use, trade, or invest in these cryptocurrencies and the cryptomarket.
