According to BlockBeats, the U.S. Securities and Exchange Commission (SEC) has issued a statement regarding certain proof-of-work (PoW) mining activities. This move aims to provide greater clarity about the application of federal securities laws within the cryptocurrency sector. The SEC's Corporate Finance Division has expressed its views on activities conducted on PoW networks, which are commonly referred to as 'mining.'
The statement specifically addresses the mining of crypto assets that are closely related to the operational functions of public networks that do not require permission. These crypto assets are acquired by participating in the network consensus mechanism or by maintaining the technical and security operations of the network. The SEC refers to these assets as 'covered crypto assets' and mining activities on PoW networks as 'protocol mining.'
Under the Securities Act Section 2(a)(1) and the Exchange Act Section 3(a)(10), the term 'security' is defined by including various financial instruments, including 'stocks' and 'bonds.' Since the covered crypto assets do not fall under any of the financial instruments expressly listed in the definition of 'security,' the SEC's analysis of certain transactions involving these assets in the context of protocol mining relies on the 'investment contract' test established in the U.S. Supreme Court case SEC v. W.J. Howey Co. The Howey test is used to evaluate arrangements or instruments not expressly mentioned in legal provisions, focusing on their 'economic reality.'
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