Small business advocacy group recommends US congress ‘clarify the status of digital assets’

The U.S. Securities and Exchange Commission, or SEC, has delivered a report to Congress containing recommendations from small businesses seeking regulatory clarification on the role of digital assets. 

In a Sept. 27 announcement, the SEC’s Office of the Advocate for Small Business Capital Formation reported on recommendations from the commission’s 40th Annual Small Business Forum held in May. Participants at the forum — including all 5 SEC Commissioners, 14 members of SEC staff, 12 small business advocates, 11 guest speakers, and 610 other participants from the U.S. public — recommended that the U.S. Congress “clarify the status of digital assets to make clear when it is a security.”

The recommendation from the Small Business Forum included no additional details regarding the reason the group sought changes to the regulatory framework concerning digital assets. However, the SEC clarified in its response that the current standard in determining whether cryptocurrencies like Bitcoin (BTC) qualify as “investment contracts” and thus securities is using the Howey Test. In addition, the Commission cited a 2019 framework published by the Strategic Hub for Innovation and Financial Technology, or FinHub, “analyzing whether a digital asset is an investment contract and whether offers and sales of a digital asset are securities transactions.”

“We encourage market participants looking to determine whether a digital asset is a security to seek the advice of securities counsel and engage with FinHub staff,” said the SEC.

Related: Finance Redefined: Layer-two growth and the SEC’s scrutiny, Sept. 19–23

The tagline is a familiar one for the Commission. SEC chair Gary Gensler has consistently called for cryptocurrency platforms and projects to “come in and talk” to the agency rather than wait for possible enforcement action. Cointelegraph reported in August that the SEC chair hoped to introduce crypto-related policy changes surrounding stablecoins, token offerings, decentralized finance, custody, exchange-traded funds and lending platforms.