October 22, 2020

SEC: Bitcoin is not a security

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According to a letter dated October 1, 2019 created by the SEC Investment Management Department, Bitcoin is not a security.

Crypto Fund Cipher Technologies filed with SECapplication for registration as a closed fund and an "investment company" in accordance with the Law on Investment Companies of 1940. In the application, Cipher's leadership held that Bitcoin is a security. However, SEC employees do not agree with the arguments of Cipher.

According to the SEC letter:

We do not think current Bitcoin buyersrely on the basic management and entrepreneurial efforts of others for profit. Accordingly, since Cipher intends to invest almost all of its assets in Bitcoin in the form in which they are currently structured, it does not meet the definition of an “investment company” in accordance with the Law on Investment Companies.

Moreover, if you consider Bitcoin as valuablepaper, many new problems related to registering an asset would come up. It is also noted that Cipher did not address “substantive legal issues, as well as investor protection issues, especially regarding the evaluation, storage and potential manipulation of the Bitcoin market” that were raised earlier this year. For these reasons, employees came to the conclusion that Cipher incorrectly approached the registration of an investment company in accordance with the Law referred to.

Although the letter is notBy regulation, it is a public confirmation that the SEC does not consider Bitcoin a security. In addition, SEC relies on a core document issued earlier this year to provide a detailed classification of assets as a guide.