The lawsuit between Ripple and the U.S. Securities and Exchange Commission has become widely known and the entire crypto community is eagerly awaiting its result. However, if you are holding Tether or Binance Coin, you may also have cause for concern. According to a legal expert, BNB and USDT meet SEC standards for reviewing securities violations. Once Ethereum migrates to proof-of-stake, it is also more likely that it will arouse the anger of the US Securities and Exchange Commission.
SEC Uses Howey Test to Determine if an Asset is a Security
Attorney Jeremy Hogan investigated the possibility of an SEC strike in his latest video. Following Ripple’s lawsuit with the SEC, Hogan became known in the cryptocurrency community for his Legal Briefs video.
The SEC uses the famous Howey test to determine if an asset is a security. When a person invests money in an ordinary business and expects to benefit from the efforts of a third party, the test rates the asset as a security.
The king of cryptocurrencies is least called a security. However, contrary to popular belief, BTC is also centralized to some extent. 1,000 people have up to 40% of the supply and 2% of the wallets control 95% of the circulating BTC. If the SEC believes there are some popular companies out there manipulating the price of Bitcoin, it may appear after the top cryptocurrencies.
There is an argument against Bitcoin, but it is very weak. I don’t lose sleep because of that.
Ethereum is also very decentralized. In contrast to Bitcoin, Ethereum has a central authority – the Ethereum Foundation – which has a great influence on crypto. More importantly, Ethereum raised funds from investors prior to the presale. This makes it more likely to fall within the scope of the SEC due to securities violations.
Former director of the US Securities and Exchange Commission, William Hinman, once stated that only Ethereum and Bitcoin are exempt from classification as securities. However, if the SEC decides to take action against Ethereum, it doesn’t matter, according to Hogan.
Ethereum 2.0: 6/10
Ethereum turns to Proof-of-Stake for its ETH2 protocol upgrade. Hogan believes this will make it more of a security. The biggest problem arises from the staking feature in ETH2, where investors lock their funds and expect a profit. This would be in accordance with the SEC’s rules that when investors expect to benefit from the efforts of others, assets become securities.
There is no doubt that with the introduction of ETH2, the SEC will see the advancement and improvement of the network through semi-central entities.
Tether is one of the most controversial tokens on the market and, according to Hogan, it will most likely be adopted by the US Securities and Exchange Commission. USDT’s problems can be traced back to a few years ago when the New York attorney general accused the company of misleading the market about its token support. In addition, the company prints USDT at will and participates directly in its market development.
I would say this makes Tether’s danger level 9 (out of 10), but you don’t own it and you may never own it, so you probably won’t care.
Binance coin: 8.5/10
Binance Coin (BNB) will also not go well with the SEC. The Binance exchange ran an ICO in July 2017 and sold BNB to the public, some of which were American. The exchange has a huge impact on the performance and profitability of BNB tokens. It even bought back and destroyed some BNB just to make BNB more valuable.
For these reasons, we have a strong argument that Binance Coin is a security.