Regulators continue to debate how to define cryptocurrencies, such as bitcoin, and whether they are securities, commodities or properties, etc., which is critical for how regulators choose to enforce those regulations.
At the recent National Association of Attorneys General Consumer Protection Conference in November 2021, Hester Peirce, commissioner of the U.S. Securities and Exchange Commission (SEC), commented on the issue[1], saying “the view we are taking these days is that pretty much everything is a security.”
While the public has closely scrutinized nebulous and sometimes contrary statements made by federal regulators regarding cryptocurrency enforcement, two recent actions against BlockFi and Celsius[2] — companies that let consumers buy, borrow and trade bitcoin — make it clear that state regulators are taking coordinated action to regulate bitcoin-related investment products and exchanges offering unregistered securities.
State regulators’ unwillingness to sit on the sidelines and watch the feds opine on the proper regulatory regime is consistent with how states have affirmatively led the charge to regulate other emerging technologies related to Bitcoin. State regulators are not scrutinizing bitcoin itself in the recent enforcement actions, instead they are targeting the technological innovations that are spurred by Bitcoin.
These technologies being investigated often involve bitcoin and other cryptocurrencies, which adds to the inherent risk to investors and consumers investing in bitcoin. Due to the volatility of bitcoin’s price, legal probes into emerging technologies may affect the price of bitcoin and thus, emerge as a consumer protection requiring further actions by state regulators.
All players in cryptocurrencies should be keeping an eye on the states’ policy priorities, because the states are clearly keeping an eye on them.
In recent years, state regulators — primarily attorneys general and securities regulators — have led the charge to
