What Makes a Crypto Asset a Security in the US?

The US Securities and Exchange Commission (SEC) has been cracking down on crypto assets that it deems to be securities. But what makes a crypto asset a security in the first place?

The Howey Test is a legal framework used by the SEC to determine whether an investment is a security. The test has four parts:

1. There is an investment of money.
2. The investment is in a common enterprise.
3. The investor expects profits to be derived solely from the efforts of others.
4. The investment is not primarily a matter of speculation.

If a crypto asset meets all four parts of the Howey Test, then it is considered to be a security. This means that it is subject to the same regulations as other securities, such as stocks and bonds.

Some of the factors that the SEC considers when determining whether a crypto asset is a security include:

• The structure of the investment.
• The marketing materials used to promote the investment.
• The level of control that investors have over the investment.

If you are considering investing in a crypto asset, it is important to understand whether it is a security. If it is, then you will need to be aware of the regulatory requirements that apply to securities.

Here are some examples of crypto assets that have been deemed to be securities by the SEC:

• The DAO, a decentralized autonomous organization that was launched in 2016. - read more
• The BitConnect lending platform, which promised investors high returns through a lending program.
• The Telegram Open Network (TON), a blockchain project that was shut down by the SEC in 2020. - read more

A more complete list of Crypto assets deemed as securities by the SEC can be found here.