Esther Pierce: "The Howey test has too many ambiguities regarding cryptocurrencies"

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U.S. Securities and Exchange Commission (SEC) Commissioner EstherPearce believes that there are too many uncertainties in the Howey test to be applied to cryptocurrencies.

A TestHowi is used to determine whether an asset is a security.The test has its origins in the case of the orange trees from1946.The Supreme Court established the criteria by which a financial arrangement maybe considered an investment contract and be subject to federal securities laws.According to the court's definition, an investment contract is an agreement, transaction or scheme under which a person investsmoney in the joint venture and expects profits solely from the efforts of the founder of the enterprise or a third party.

In a recent interview, Hester Peirce noted that the testHowie is often applied in the cryptocurrency industry, as many people buying tokens are countingHowever, the Howey test has its own nuances, since the existence of an investment contract depends onnot only the assets, but also the promises that they makeits issuers, argues Pierce.She gave an exampleWith the same orange grove:

"The fact that I sold you an orange grove as part of an investment contract does not turnAnd if I sold you a grove and promised that I would take care of it, and it would beto make a profit for you, you can think of it as a securities offering," Pearce said.

The SEC Commissioner clarified that TestHowie does not considerthe question of whether the crypto asset itself is a security.The question is much more difficult to answer, and people's opinions are divided.rely entirely on this test in an attempt to determine whetherwhether a certain crypto asset is considered a security, Pierce is sure.

Pearce referred to a speech by SEC Director of Corporate Finance William Hinman from2018, in which he stated that Bitcoin and Ethershould not be classified as securities due to a sufficient level of decentralization.However, Pierce doubts that the Howie test can be used to determine the boundaries when an asset becomes decentralized.

"We have decided that the orange grove will be treated as a perpetual security, and we do not know when it will ceaseAt the time of the token sale, this may well be the case.pass for an IPO, but that doesn't mean they're going to be securities forever," Pearce said.

In October, Pierce stated the need to clarify the rules for regulating non-fungible tokens (NFTs), as some of them can also beSecurities laws.