What is the impact of the US SEC considering 19 tokens on Binance and Coinbase as securities?

The U.S. SEC has named 19 tokens as securities in its lawsuit against Binance and Coinbase. This could have a huge impact on these tokens and the entire crypto industry.

Here is a full list of tokens that the US SEC considers to be securities:

Binance：ATOM、BNB、BUSD、COTI；

Coinbase：CHZ、NEAR、FLOW、ICP、VGX、DASH、NEXO。

Both: SOL, ADA, MATIC, FIL, SAND, MANA, ALGO, AXS, and interestingly ETH is excluded.

What do these tokens have in common?

1. There is an initial sales/fundraising event; 2. Each project commits to improving the protocol through continued development (including business development/marketing expenses); 3. Social media is used to express the features/benefits of the protocol.

This is where the Howey test comes in. There are 4 criteria for determining whether something is an “investment contract” (security): 1. Investment of money; 2. Investment in a common enterprise; 3. Expectation of profit; and 4. Profit derived from the efforts of others.

The SEC argued that the above 19 tokens met the requirements of the Howey Test due to the above three common factors, thereby generating an “expectation of profit.”

What would be the impact if these tokens were considered securities?

1. These tokens will not be traded on U.S. exchanges. 2. They may be delisted from U.S. exchanges (such as Coinbase and Robinhood) during the transition period. 3. This will bring regulatory challenges and set a shocking precedent.

The main issue here is that the Howey test is an outdated, relatively limited framework, created in 1946. Applying a precedent established in 1946 to an entirely new class of digital assets presents challenges.

In my opinion, the reckless approach taken by the US lacks nuance or foresight. I would expect other countries to take a different approach. We have seen more proactive/thoughtful developments from other developed countries (e.g. UAE, and even UK/Australia).

One thing is certain: we need regulatory clarity. For the sake of the industry as a whole, its current development, and future growth, we need clear guidelines on how cryptocurrencies can enter the financial system.

That will come with time. But until then, buckle up for a bumpy ride.