SEC says proof-of-work mining does not constitute securities dealing

The US Securities and Exchange Commission’s Division of Corporation Finance has clarified its views on proof-of-work mining, arguing that such activities do not constitute “the offer and sale of securities” as outlined in the Securities Act of 1933, so long as they meet certain criteria.

In a March 20 statement, the SEC division addressed the “mining of crypto assets that are intrinsically linked to the programmatic functioning of a public, permissionless network” and determined that decentralized PoW networks should not be treated as securities.

Although the SEC’s statement did not name any specific blockchain, its views on certain PoW activities apply to permissionless networks where mining is used to participate in the consensus mechanism. The statement applies to solo miners and mining pools participating in such networks. 

Although Bitcoin (BTC) is by far the largest and most significant PoW chain, there are several others, including Dogecoin (DOGE), Litecoin (LTC) and Monero (XMR). US regulators have long considered Bitcoin to be a commodity and not a security — a view that also extends to Litecoin and Dogecoin, according to the Commodity Futures Trading Commission. 

Related: Trump says US will be ‘Bitcoin superpower’ as BTC price breaks 4-month downtrend

A pro-crypto policy tailwind

Digital asset markets, including PoW chains, are set to flourish under US President Donald Trump, who has vowed to make America the world’s blockchain and crypto capital. 

In addition to appointing a pro-crypto replacement to Gary Gensler at the SEC, the president has established the Council of Advisers on Digital Assets to advance common-sense regulations for the industry. 

On March 19, the council’s executive director, Bo Hines, revealed that a comprehensive stablecoin bill could land on the president’s desk in a matter of months. 

The same day, the Blockchain Association, an industry advocacy group, said a cryptocurrency market structure bill is expected by the summer. 

“I think we’re close to being able to get those done for August […] They’re doing a lot of work on that behind the scenes right now,” said Kristin Smith, the Blockchain Association’s CEO.

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