Diego Zuluaga, an analyst at the Cato Institute’s Center for Financial and Monetary Alternatives, recently wrote a briefing paper on cryptocurrencies.
In it he discussed how ICOs may be considered securities as they do meet the criteria of the Howey Test which is used to determine the status of an asset. However Zuluaga does believe that cryptocurrencies themselves are commodities, and writes that: ‘It is indeed difficult to justify a securities designation for Bitcoin, Ethereum, and other cryptocurrencies currently in circulation, as they fail to meet the definition of securities established by legal precedent.’
Zuluaga puts forward a proposal for regulating the cryptocurrency market in a manner that does not hinder its growth. He calls for the distinction between cryptocurrencies already circulating in the market and ‘promises to deliver cryptocurrencies’ such as ICOs. The briefing paper concludes by stating that classifying current cryptocurrencies as commodities and treating other crypto products such as ICOs as securities (if they pass the Howey Test) would be the most balanced approach towards cryptocurrencies. It remains to be seen if cryptocurrency markets will be regulated in such a manner in the future.