Should crypto assets be regarded as securities? Implications and findings.

Abstract

This paper examines the debate surrounding the classification of crypto assets as securities and its implications on the regulatory framework. The emergence of blockchain technologies and their widespread adoption have presented challenges for regulators in fitting these assets into existing financial and regulatory frameworks. The U.S. Securities and Exchange Commission (SEC) has taken a proactive stance in asserting its authority over the crypto economy. To analyze the SEC's position, this paper explores the Howey Test, a legal framework used to determine whether an investment arrangement qualifies as a security. It evaluates each criterion of the test in the context of crypto assets and discusses the SEC's evolving stance. The paper emphasizes the importance of considering the context and actual influence of investors and promoters when determining whether a common enterprise exists. It also highlights the need to distinguish between cryptocurrencies marketed as currencies and those primarily used as investment assets. The paper concludes that clear definitions and regulatory guidelines are necessary to address the complexities of crypto assets and their interaction with traditional financial markets. The outcome of ongoing lawsuits and regulatory decisions will shape the future development and integration of crypto assets into existing frameworks.