Cryptocurrency has an SEC problem — and it just got bigger.

The Biden administration is taking a more hands-on approach to the highly volatile, little understood, and barely regulated cryptocurrency industry. Cryptocurrencies are decentralized digital currencies secured by blockchain technology. Bitcoin, ethereum, and other cryptocurrencies have become almost as accessible as government-issued currency in recent years, but the government offers few consumer protections for them.

The Securities and Exchange Commission (SEC) — led by Gary Gensler, who taught a class on cryptocurrency at MIT — is trying to make the case that it can and will regulate whatever cryptocurrency investment schemes it decides fall under its purview. The relative newness and rapid expansion of the cryptocurrency industry have put it in a regulatory gray area. The Internal Revenue Service (IRS) classifies crypto as property. The Commodity Futures Trading Commission (CFTC) considers crypto to be a commodity. And the SEC has said that digital assets “may be securities, depending on the facts and circumstances.” A security is a financial asset that can be traded, like stocks and bonds, and which is governed by several laws designed to prevent fraud and protect investors.

The SEC appears to have decided that an upcoming offering from Coinbase, the largest cryptocurrency exchange in the United States, meets its definition of a security. And it’s showing that it will step in and regulate it accordingly — and, by extension, regulate the rest of the crypto finance
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