July 21, 2024
Policy & Regulation

SEC’s Controversial Claim: Crypto Lacks ‘Innate or Inherent Value

As part of its lawsuit against Coinbase in federal court, the Securities and Exchange Commission claims that cryptocurrencies lack any “innate or inherent value”—a claim that has earned the scoffs of Coinbase and cryptocurrency observers.

The SEC asked a court to reject Coinbase’s argument that bitcoin trading does not constitute an investment contract between parties in response to a move to dismiss the agency’s complaint filed over the summer. It reiterated its claim that the federal securities laws are intended to be read broadly following the “Howey Test,” a legal principle, to support its argument.

The SEC has maintained under Howey for decades that a variety of ventures, including chinchilla farms and whiskey caskets, may be governed as investment contracts. While the tokens it identified in its case fit the requirements of Howey, it claims that many cryptocurrencies only vary from one another as they “have no innate or inherent value” on their own.

“If crypto assets embody some underlying value, that value is accessed through the digital token,” the SEC stated. “But the token… has no innate or inherent value of its own—it is tied to its underlying value, which for the crypto assets at issue in this case is the investment contract.”

However, Coinbase’s chief legal officer, Paul Grewal, disregarded the SEC’s claims, calling their petition “more of the same old, same old” thinking.

“The SEC’s arguments today would mean that everything from Pokemon cards to stamps to Swiftie bracelets are also securities,” Grewal stated. “As [New York congressman Rep. Ritchie Torres] made so clear last week, that is simply not the law, nor should it be.”

In the hearing held by the House Financial Services Committee last month, Rep. Torres questioned Gary Gensler.

“There is so much wrong with the SEC’s brief in the Coinbase case that I don’t know where to begin,” stated Alderoty on Thursday. “Let’s start with the SEC claiming, without citation or support, that digital assets have no innate or inherent value while collectable baseball cards do.”

The SEC included many cryptocurrencies it deemed illegal securities, including Solana, MATIC, and Cardano, as part of its complaint against Coinbase filed on June 6. These coins’ creators have objected to this classification, and Coinbase has refuted the accusations levelled against it.

Since the beginning of the technology, many have questioned the worth of cryptocurrencies. Tokens, unlike fiat money like the U.S. dollar, do not have the legal support of a government organization, and some, like Bitcoin, were created to function decentralized. Instead, the market forces of supply and demand largely decide the value of tokens.

Image: Wallpapers.com

Disclosure Statement: Miami Crypto does not take any external funding, or support to bring crypto news to the readers. We do not have any conflicts of interest while writing news stories on Miami Crypto.

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