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Are stable cryptocurrencies securities or not?

Are stable cryptocurrencies considered to be securities? A review by a Bitcoin mixer: mixer.money
Are stable cryptocurrencies securities or not?

  1. Stablecoins are once again out of favor
  2. Is the concern real or is it all part of a scheme?
  3. Will stablecoins be officially recognized?

Gary Gensler, the Chairman of the Securities and Exchange Commission, has once again agitated the cryptocurrency community: during a hearing at the Senate Banking Committee this Tuesday, he refused to rule out regulating stablecoins as securities. This will cause significant regulatory problems for issuers.

Gary Gensler did not give a direct answer to the question about stablecoins. A review by a Bitcoin mixer: mixer.money

Pat Toomey, a Republican Senator from Pennsylvania, asked Gary Gensler whether stablecoins and cryptocurrencies could be regarded as securities. The Commission’s Chairman sidestepped the question by saying that “they may well be securities.”

Stablecoins are once again out of favor

We have already written that many investors believe in the potential of stablecoins and consider them to be the golden mean which combines the best of the two financial worlds — fiat money and cryptocurrencies.

For some time, stablecoins have served as an integral element of the crypto market and have facilitated trading between popular cryptocurrencies, such as Bitcoin and Ethererum. However, regulators are concerned that stablecoins may pose a threat to the financial stability of the current economic system. Investors use them as cash substitutes, even though their turnover is still not entirely regulated.

This July, Treasury Secretary Janet Yellen held a meeting of the President’s Working Group on Financial Markets, in order to address the threat posed by stablecoins to the stability of the global economy. She emphasized “the need to act quickly to ensure there is an appropriate regulatory framework in place.”

Treasury Secretary Janet Yellen. A review by a Bitcoin mixer: mixer.money

Is the concern real or is it all part of a scheme?

Gensler’s opponents argue that the Commission’s Chairman does inded believe in the potential stablecoins and his actions are aimed at asserting the authority over the new instruments, even with minimal legal justification.

In his interview with MarketWatch, Dean Steinbeck, general counsel at the blockchain platform Horizen, claimed that “Gensler is very clear in wanting the SEC to have unlimited powers with respect to crypto.” He also stated that he agreed with Toomey’s analysis of the Howey Test: given that stablecoin buyers do not have a reasonable expectation of profit, stablecoins fail the Howey Test and cannot be considered a security.

Will stablecoins be officially recognized?

In the U.S., a financial asset must pass the Howey test, to be considered a security. If it passes the test, all transactions involving such assets are regulated by two laws and shall be carried out according to certain requirements to information disclosure and registration.

According to Gensler, stablecoins are covered by these laws , as there are other financial instruments that fail the test but are regulated under this legislation.

Rohan Grey, president of the Modern Money Network and assistant professor of law at Willamette University, tweeted that among other things stablecoins may be considered as evidence of indebtedness, a note, or a certificate of deposit, which are all securities in accordance with the federal law.

According to research by Gary Gorton, a professor of finance at the Yale School of Management, the statement that a stablecoin is a security is rather controversial, and regulating authorities at the Treasury Department and Federal Reserve will likely interfere in order to regulate these instruments.

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