The U.S. Securities and Exchange Commission (SEC) Clarifies Its Stance on Proof-of-Work (PoW) Mining
The U.S. Securities and Exchange Commission (SEC) has clarified its position regarding the Proof-of-Work (PoW) mining of cryptocurrencies, stating that specific PoW mining activities do not involve the issuance and sale of securities, and that participants in mining activities are not required to register with the SEC under securities laws. This represents one of the latest actions by the agency to adopt a more favorable stance towards the cryptocurrency industry.
In a statement released on Thursday, the SEC’s Division of Corporation Finance wrote:
The legal basis for this statement is the Howey Test, a standard derived from a 1946 U.S. Supreme Court ruling that is frequently referenced by the SEC to determine whether an asset qualifies as an “investment contract,” thus categorizing it as a security. The SEC stated:
Regarding mining pools, the SEC explained that miners can join mining pools to consolidate processing power and share rewards. Similar to mining itself, mining pools do not provide profit expectations derived from the entrepreneurial or managerial efforts of others.
Cody Carbone, representing The Digital Chamber, an advocacy group for U.S. digital assets and blockchain innovation, stated that the SEC’s announcement is significant for Bitcoin miners, as it provides much-needed legal certainty and removes obstacles for the development of the U.S. mining industry.
Currently, the largest and most influential PoW blockchain is Bitcoin, while Dogecoin, Litecoin, and Monero also utilize this consensus mechanism. Ethereum transitioned from PoW to Proof of Stake (PoS) following its Merge upgrade in September 2022.
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