TLDR
- SEC announced that proof-of-work mining does not violate U.S. securities law
- Bitcoin, Dogecoin, and other proof-of-work cryptocurrencies are not considered securities by the regulator
- The decision states miners’ rewards “are not derived from any third party’s managerial efforts”
- This marks a shift from the previous administration’s approach to crypto regulation
- Trump administration has established a crypto task force led by Hester Peirce to provide clearer industry rules
New Regulatory Landscape
The U.S. Securities and Exchange Commission (SEC) announced on Thursday that proof-of-work mining operations do not need to register as securities. This decision affects major cryptocurrencies like Bitcoin and Dogecoin, which run on proof-of-work blockchains.
In its latest guidance, the SEC stated mining activities “do not involve the offer and sale of securities.” This clarification helps resolve a long-standing question in the cryptocurrency industry about the regulatory status of mining rewards.
The SEC explained that miners’ “expectation to receive rewards is not derived from any third party’s managerial or entrepreneurial efforts.” This is a key distinction that separates mining from activities that would pass the Howey test for securities.
Proof-of-work blockchains require computers to solve complex mathematical problems to process transactions and add new blocks. Miners contribute computational resources to secure these networks and validate transactions.
Bitcoin, the oldest and largest cryptocurrency, relies on proof-of-work mining. Dogecoin and Litecoin also use this method, making them beneficiaries of the SEC’s new stance.
Contrasting Approaches
This decision marks a clear shift from the SEC under its previous leadership. The former administration had declared that proof-of-stake blockchains like Ethereum and Solana could satisfy the Howey test.
Under U.S. law, an asset passes the Howey test if it involves an investment of money in a common enterprise with an expectation of profit based on others’ efforts. The SEC previously hit several crypto companies with fines for offering staking services.
The previous SEC chair Gary Gensler took a tougher stance on cryptocurrency regulation. Many in the industry criticized this approach as “regulation by enforcement” rather than providing clear guidelines.
President Donald Trump’s administration has taken a more crypto-friendly approach. Trump has vowed to make America “the world’s blockchain and crypto capital.”
The new SEC leadership has scrapped a number of lawsuits and investigations against crypto companies. This represents a major policy shift in how digital assets are regulated in the United States.
Future Regulatory Framework
The SEC has established a crypto task force led by Commissioner Hester Peirce, nicknamed “Crypto Mom” for her supportive stance on digital assets. Peirce has criticized the previous administration’s approach to regulating the industry.
In a letter last month, Peirce acknowledged that fixing the regulatory framework would take time. She wrote: “It took us a long time to get into this mess, and it is going to take us some time to get out of it.”
The SEC’s statement specifically addresses “mining of crypto assets that are intrinsically linked to the programmatic functioning of a public, permissionless network.” This applies to both solo miners and mining pools.
U.S. regulators have consistently viewed Bitcoin as a commodity rather than a security. The Commodity Futures Trading Commission (CFTC) extends this view to Litecoin and Dogecoin as well.
The industry may see more regulatory clarity soon. Bo Hines, executive director of the President’s Council of Advisers on Digital Assets, revealed that a stablecoin bill could reach the president’s desk within months.
The Blockchain Association, an industry advocacy group, expects a cryptocurrency market structure bill by summer.
Kristin Smith, the association’s CEO, said: “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.”
This new regulatory environment appears poised to provide the clarity that crypto companies and investors have long sought. The SEC’s guidance on proof-of-work mining represents just one step in what seems to be a broader regulatory reset.
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