The SEC Is Wrong for Classifying Crypto Assets as Securities: Experts

• The U.S. SEC is wrong in its classification of crypto assets as securities, according to Chairman and Co-founder of PDX, Shane Rodgers.
• Howey Test is outdated for making determinations over crypto assets, Rodgers added.
• The SEC has been uneven and contradictory in its efforts to regulate the crypto industry, said Christopher Alexander, CAO at Pioneer Development Group.

The U.S. Securities and Exchange Commission (SEC) is wrong in its classification of crypto assets as securities, according to Shane Rodgers, Chairman and Co-founder of PDX. In an exclusive chat with Coin Edition, Rodgers noted that the SEC is using an outdated Howey Test to make determinations over crypto assets.

According to the PDX chair, the 90-year-old test is too simplistic and unable to track contemporary needs for decision-making. He suspects the regulator is deploying the test as an excuse rather than a solution to the current regulatory challenges.

Rodgers thinks the only way forward for the SEC is to separate crypto projects from the corporate entities that oversee them, and beyond that, it needs to hand over the regulatory role to the Commodity Futures Trading Commission (CFTC) and the Financial Industry Regulatory Authority (FINRA).

In a separate chat, Christopher Alexander, Chief Analytics Officer of Pioneer Development Group, told Coin Edition that the SEC has been incredibly uneven and contradictory in its efforts to regulate the crypto industry. 

As a way forward, Alexander suggested that the SEC acknowledge that the unique blockchain technology complicates enforcement action based on existing laws and precedents. He explained that the Howey Test adopted by the SEC might work well for centralized exchanges but cannot apply to decentralized systems, where conditions change rapidly.

The analytics officer thinks a combination of clarity, consistency, and a better appreciation of the nuances of the technology will go a long way to effective regulation of the crypto industry. According to him, the industry needs the SEC to reassure the public about crypto.

Alexander criticized the current crypto regulatory approach in the U.S., where the SEC has engaged in regulation by enforcement while Congress has failed to pass laws to stop it. He noted that the establishment has a habit of charging firms with ex-post-facto violations that demonstrate a near-complete lack of clear, executable guidance.