BIS says cryptocurrencies should be seen as securities

June 26, 2018
Chris Wheal

Cryptocurrencies should be considered as securities says the economic adviser and head of research at the Bank for International Settlements (BIS).

Bank for International Settlements, Basel, Switzerland: BIS

The so-called central bank to the central banks held its annual general meeting at the weekend, where adviser Hyun Song Shin said cryptocurrencies should be treated similar to stocks and bonds and other financial instruments such as derivatives.

At odds with the SEC

If BIS backs the advice of Hyun it would put the organisations at odds with the Securities and Exchange Commission (SEC) in the US: the SEC believes many cryptocurrencies, particularly bitcoin and ethereum, should not be treated as securities, but rather like commodities.

However, the SEC does believe that all initial coin offerings (ICOs) should be treated as securities since they act in the same way as initial public offerings (IPOs) which offer the security of equity in a company to raise cash.

Hyun said at the meeting: “If people pay to hold the tokens for financial gain, then arguably they should be treated as a security and come under the same rigorous documentation requirements and regulation as other securities offered to investors for a return.”

Transaction costs

He delved deeper into the market, looking at cryptocurrency transaction costs and how they surged when prices fell sharply during first quarter of this year.

“This kind of surge in transaction costs resembles what happens in securities markets when market liquidity dries up during sharp price changes. In this sense, bitcoin is more like a cryptoasset, or a cryptosecurity, than a currency.”

Carney comments

Bank of England governor Mark Carney expressed a similar opinion in March when speaking at the Scottish Economics Conference, saying it was time to bring the cryptocurrency ecosystem into line with the rest of the financial system, and applying to it the same “rigorous standards” of regulation.

Hyun added: “As you know, this is a hot button topic for discussion among securities regulators and other financial supervisors.”

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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