SEC Clarifies Rules for Proof-of-Work Mining
The U.S. Securities and Exchange Commission (SEC) has released latest guidance on the principles surrounding proof-of-work mining, a process that underpins many blockchain networks, including Bitcoin and another cryptocurrencies.
Mining Operations Do Not Need to Register
According to the SEC’s latest guidance, mining operations don’t have to register their activities as they "don’t involve the offer and sale of securities." This clarification goals to supply greater clarity for the fast-moving industry, which has been a subject of controversy previously.
A Brief History of Controversy
Securing crypto networks has been a contentious issue previously, with the SEC under the previous administration declaring that proof-of-stake blockchains, resembling Ethereum and Solana, could satisfy the Howey test. Under U.S. law, an asset passes the Howey test and meets the definition of a security whether it is an investment of cash in a standard enterprise from which there’s an expectation of profit based on that enterprise’s efforts.
Major Cryptocurrencies Run on Proof-of-Work
Major cryptocurrencies resembling Bitcoin, Dogecoin, and Litecoin run on proof-of-work blockchains. For such a blockchain to operate, computers around the globe race to unravel mathematical problems with the intention to process blocks on the network and process transactions. Proof-of-work requires miners, that are typically large, industrial operations, especially with Bitcoin, the most important and oldest cryptocurrency. However, some people attempt to mine the asset alone, with Dogecoin and another less-valuable cryptocurrencies proving easier to mine than Bitcoin.
SEC’s Rationale
As proof-of-work miners are rewarded with digital coins, the SEC said it desired to clear up whether or not this is able to constitute coping with securities. According to the regulator, as a miner’s "expectation to receive rewards will not be derived from any third party’s managerial or entrepreneurial efforts upon which the network’s success depends," it doesn’t come under the SEC’s jurisdiction. "By adding its computational resources to the network, the miner merely is engaging in an administrative or ministerial activity to secure the network, validate transactions and add latest blocks, and receive rewards," the SEC said.
Conclusion
The SEC’s clarification on proof-of-work mining is a big development on the earth of cryptocurrency, providing greater clarity and stability for the industry. As the regulatory landscape continues to evolve, it is important for people and businesses to remain informed in regards to the latest developments and guidelines. By doing so, we will ensure a safer and more sustainable future for the crypto space.
