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The U.S. Securities and Exchange Commission (SEC) has stated that digital assets have no inherent value.<\/p>\n
In a court motion filed<\/a> last week against Coinbase, the top US crypto exchange by volume, the regulatory agency says that digital assets have no real value as they cannot generate profits on their own.<\/p>\n \u201cReal estate has \u2018inherent value,\u2019 whereas a crypto token \u2018will generate no profit absent an ecosystem that drives demand.’\u201d<\/i><\/p>\n The SEC references the Howey test, a legal criteria often cited to determine whether a transaction counts as an investment contract or not, to help prove its point.<\/p>\n According to the Howey test, an investment contract is\u00a0\u201ca contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.\u201d<\/p>\n Says the SEC,<\/p>\n \u201cAny suggestion that the potential utility of some of the assets somehow changes the analysis is wrong. The investment contracts in Howey involved the sale of an asset \u2013 orange groves. Other tangible assets sold as part of investment contracts include beavers, whiskey caskets, and chinchillas \u2013 assets with inherent value\u2026\u00a0<\/em><\/p>\n Crypto assets are unlike the tangible assets sold in those cases.\u201d\u00a0<\/em><\/p>\n According to the SEC\u2019s argument, crypto\u2019s lack of inherent value makes it an investment contract, and therefore, under the jurisdiction of the SEC.<\/p>\n \u201cIf crypto assets embody some underlying value (like an entry on a ledger), that value is accessed through the digital token. But the token (which is just software) has no innate or inherent value of its own \u2013 it is tied to its underlying value, which for the crypto assets at issue in this case, is the investment contract. Without the access to a service or the intellectual property those crypto assets signify, they would be worthless.\u00a0<\/em><\/p>\n After all, investors are not purchasing those assets to own a digital sequence of letters and numbers.\u201d<\/em><\/p>\n Last month, Coinbase\u00a0said<\/a>\u00a0that the SEC\u2019s enforcement-only approach is negatively impacting the US economy.<\/p>\n Don’t Miss a Beat \u2013 Subscribe<\/a> to get email alerts delivered directly to your inbox <\/span><\/em>
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