Crypto currencies have for a while now avoided a lot of the typical securities requirements that the SEC enforces for similar investible assets that’s crypto currencies would are treated as currencies, not commodities or securities
But lately, Coinbase has been under investigation by the SEC for not registering crypto based securities. So, how does this make sense?
Well, the issue arose when Coinbase introduced a lending program allowing customers to earn interest of around 4% per year by lending a certain stable coin to Coinbase.
Coinbase’s CEO was a bit taken back by the ruling, but in order to determine if something is a security, it must pass the Howey Test which states that something is a security if there is an “investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”
So, given this, does it pass the Howey Test?
Well, former SEC regulator Amy Lynch said explicitly that crypto assets cross the regulatory line “when you start lending them out.”
And this makes sense. When you lend out money, it becomes a security. So, if you’re going to lend out a different currency, it should be treated the same way.
#Shorts
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