Altcoins are a general term for all cryptocurrencies other than Bitcoin. They usually operate on the underlying technology of Bitcoin, which is the blockchain, and represent various cryptocurrencies developed for different purposes. They encompass a wide range of different digital currencies with different features, use cases, and potential in the cryptocurrency market. Securities, on the other hand, are investment instruments that provide individuals or organizations with the right to capital appreciation, profit sharing, or other investment returns for a specific period. Securities typically include stocks, bonds, notes, derivative instruments, and similar financial instruments. Whether altcoins are considered securities is a subject of debate.
What is Howey Test?
The Howey Test is the securities determination tool used by the U.S. Securities and Exchange Commission (SEC). It is designed to determine whether an investment qualifies as a security. The Howey Test evaluates four key criteria to help determine the security status of an investment:
1. The investment involves the use of money or money equivalents.
2. The investment is made in a common enterprise or venture operated by a company or other entity.
3. The investors expect to profit from the investment.
4. The success of the investment depends on the efforts of the company or entity issuing the investment.
If an altcoin meets the criteria outlined in the Howey Test, it is likely to be considered a security by the SEC and subject to relevant securities regulations. However, it's important to note that the Howey Test is specific to the United States and other countries may have different regulations and tests in place.
Which Altcoins are Securities?
As for which altcoins are considered securities, the SEC has identified certain altcoins as securities based on their analysis. The following is a compilation of altcoins that the SEC has declared as securities:
- GLA (2019)
- META1, XRP (2020)
- RVT, LOCKE, DUCAT (2021)
- mAAPL, mAMZN, mBABA, mGOOGL, mNFLX, mTSLA, mTWTR, mIAU, mQQQ, mSLV, mUSO, mVIXY, mMSFT, AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, KROM, DRGN, FTT (2022)
- MNGO, BUSD, LUNA, MIR, UST, BXY, BTT, TRX, OMG, NGC, TKN, NGC, IHT, SOL, ADA, MATIC, FIL, SAND, CHZ, FLOW, ICP, NEAR, VGX, DASH, NEXO, BNB, ATOM, MANA, ALGO, and COTI (2023)
Market observers and experts anticipate that the SEC's list of altcoins classified as securities may expand over time. Therefore, caution should be exercised when investing in altcoins.
