US Senators Kirsten Gillibrand and Cynthia Lummis think most altcoins would likely be considered securities under their proposed new legislationbut they confirmed that Bitcoin (BTC) and Ether (ETH) will be classified as goods.
Both Lummis and Gillibrand agreed with US Securities and Exchange Commission Chairman Gary Gensler’s assessment that most cryptocurrencies are securities under the Howey test, with Gillibrand stating:
“Most cryptocurrencies go to the SEC […] Bitcoin and Ether would definitely be commodities, and that’s agreed. It’s been agreed with Chairman Gensler as well as the Chairman of the CFTC.
Gillibrand pushed back against reports portraying the legislation as making the Commodity Futures Trading Commission the lead regulator. “I don’t think the CFTC is the primary regulator,” she said. “They just have an obligation to regulate Bitcoin and Ether, the majority of cryptocurrencies today.”
The pair made the comments at a Washington Post event on Wednesday, a day after they released details of the Responsible Financial Innovation Act.
.@SenLummis recount @ToryNewmyer“The CFTC, while it will have the lion’s share by market capitalization, the majority of digital assets…have characteristics of securities that will require the disclosure capabilities of the SEC…The role of the SEC in this regard is absolutely essential.” pic.twitter.com/1B0wnQQ62p
— Washington Post Live (@PostLive) June 8, 2022
CTFC President Rostin Behnam was also present at the event and took a slightly different view on the proportion of altcoins that are securities. He said that while there are “probably hundreds” of coins that replicate security coins, there are also many coins, such as BTC and ETH, that should be regulated by the CFTC.
“It’s pretty clear that many digital assets themselves replicate or look like commodities. They are more like stores of value than securities.
Tony Tuths, head of the digital assets team at KPMG US, told Cointelegraph that the legislation in its current form is not expected to “move forward” for the foreseeable future, adding that it was unclear which coins would ultimately fall within the jurisdiction of the SEC against the CTFC.
“Regulatory-wise, the legislation calls for the CFTC to be the primary regulator, but then carves out a broad range of tokens that have securities-like attributes for regulation by the SEC. It will be difficult to decipher what exactly is in the SEC bucket, but this could be the exception that swallows the rule. “
Related: Class action lawsuit against Coinbase alleges unregulated securities sales
The new bipartisan bill is expected to rely heavily on the Howey test to determine whether a particular coin is classified as a security or a commodity.
“We’re just trying to fit the world of digital assets into our current regulatory framework. […] We spent a lot of time on defining the modern Howey test,” Senator Lummis said during a CNBC interview on Tuesday June.
The Howey Test is a framework established by the United States Supreme Court for determining whether a transaction qualifies as an investment contract, and therefore considered a security.
The Howey test has become a focal point in the SEC case against Ripplewhich began in December 2020, alleging that the company used its digital token XRP to raise funds in 2013 and was an unregistered security token at the time.