The classification of cryptocurrency—as a digital currency or as an investment asset—has long been a point of contention in global financial circles. Recent developments have reignited this debate, particularly following reports that the U.S. Securities and Exchange Commission (SEC) is investigating Binance’s native token, BNB, raising fundamental questions about regulatory oversight in the crypto space.
👉 Discover how global regulators are reshaping the future of digital assets.
The SEC Investigation into Binance and BNB
In early June, news emerged that the U.S. SEC is conducting an investigation into Binance, focusing on its 2017 issuance of Binance Coin (BNB). The core issue: whether BNB qualifies as a security under U.S. law and should have been registered with the SEC.
This inquiry stems from the Howey Test, a legal framework established by the U.S. Supreme Court in 1946 to determine what constitutes an "investment contract." Under this test, if investors purchase an asset expecting profits derived from the efforts of others—such as a company or development team—it may be classified as a security.
While Binance has refrained from commenting on ongoing regulatory discussions, it emphasized its commitment to compliance: “We will continue to meet all requirements set by regulators.”
Although the investigation’s outcome remains uncertain and may take years to resolve, it underscores a broader trend: regulators are increasingly scrutinizing token offerings and demanding clearer boundaries between currencies, commodities, and securities.
Cryptocurrency: Currency or Asset?
At the World Economic Forum in Davos, IMF Managing Director Kristalina Georgieva made a clear distinction: “Crypto products cannot be equated with money. Anything without sovereign backing can be an asset—but not a currency.”
She argued that a key function of money is to serve as a stable store of value—something volatile assets like Bitcoin fail to consistently provide. This sentiment was echoed by central bankers worldwide.
Francois Villeroy de Galhau, Governor of the Bank of France, stated firmly: “I don’t call them cryptocurrencies. I call them crypto assets. They are not reliable money, nor reliable means of payment.”
Similarly, Thailand’s central bank governor, Sethaput Suthiwartnarueput, noted that while investing in crypto is acceptable, treating it as a payment method is inappropriate due to its instability.
Data Supporting the 'Asset' Classification
Market behavior and institutional adoption further support the view of crypto as an asset class:
- A 2021 Fidelity Digital Assets survey found that 71% of Asian institutional investors held digital assets, compared to 56% in Europe and 33% in the U.S.
- Germany’s 2021 fund law allows specialized investment funds to allocate up to 20% of their portfolios to cryptocurrencies like Bitcoin.
- Bitcoin’s price surge to nearly $69,000 in November 2021—followed by a drop below $30,000—highlights its speculative, risk-on nature typical of volatile assets.
These patterns reinforce regulatory skepticism toward classifying most cryptocurrencies as “money,” especially given their lack of intrinsic value or backing by tangible assets.
The Exception: Stablecoins and Payment Innovation
Not all digital tokens are treated equally. Stablecoins like USDT, which are backed by fiat reserves such as the U.S. dollar, occupy a unique regulatory space.
Lael Brainard, Vice Chair of the U.S. Federal Reserve, recently suggested that central bank digital currencies (CBDCs) could coexist with stablecoins and traditional banking systems. Meanwhile, UK regulators have acknowledged stablecoins as “an effective means of payment,” signaling a more progressive stance.
This differentiated approach reflects a growing consensus: while decentralized cryptocurrencies may be too volatile for everyday transactions, asset-backed stablecoins could play a legitimate role in modernizing payments infrastructure.
Divergent Regulatory Approaches Worldwide
As crypto innovation accelerates, governments are responding with varied legislative strategies.
South Korea: From Crisis to Regulation
The collapse of TerraUSD (UST) and Luna in 2022 acted as a catalyst for South Korea’s push toward comprehensive crypto regulation. The country is developing a Digital Asset Basic Act, expected to take effect in 2024, which will formally recognize virtual assets within its legal framework.
Additionally, South Korea postponed its planned crypto capital gains tax—initially set for 2022—until 2023. Under the new rules:
- Gains exceeding 2.5 million KRW (~$2,100) annually will be taxed at 20%.
- A 2% local income tax will also apply.
Germany and the UK: Taxation Models
Germany treats crypto transactions under personal income tax rules. Notably:
- Holding Bitcoin or Ethereum for over one year exempts gains from taxation.
- Activities like staking, mining, and hard forks are included in tax reporting guidelines.
In contrast, the UK applies capital gains tax to crypto profits—a model similar to South Korea’s approach.
Other nations—including Japan, Austria, Kazakhstan, and Indonesia—are actively debating or implementing similar tax frameworks. However, not all proposals pass: Portugal’s parliament recently rejected a bill to tax crypto earnings, highlighting political divides.
👉 See how global taxation policies are shaping crypto investor strategies.
Bringing Crypto Exchanges and Issuers Under Watch
Beyond taxation, regulators are expanding oversight to include initial offerings and exchange operations.
South Korea’s Financial Services Commission (FSC) has recommended:
- Licensing requirements for exchanges and token issuers based on risk levels.
Creation of a public crypto exchange with mandatory disclosures on:
- Token issuers
- Fund usage
- Project valuation
- Governance structure
Such measures aim to curb market manipulation tactics like wash trading and “pump-and-dump” schemes.
MiCA: Europe’s Landmark Regulatory Push
The European Union is advancing Markets in Crypto-Assets (MiCA), a comprehensive regulatory framework first proposed in 2020. Though still pending final approval, the UST crisis has accelerated discussions among EU lawmakers.
Once enacted, MiCA aims to:
- Reduce compliance risks for crypto firms.
- Enable traditional financial institutions to offer crypto custody, trading, and market-making services with legal clarity.
This could position Europe as a leader in balanced crypto regulation—supporting innovation while protecting consumers.
DeFi Emerges as a Regulatory Frontier
Decentralized Finance (DeFi) is now at the center of regulatory attention. According to Amberdata, total value locked (TVL) in DeFi protocols surged from $601 million in early 2020 to over $239 billion at its peak—a nearly 400x increase in just two years.
DeFi platforms operate via smart contracts on blockchains, eliminating intermediaries and enabling peer-to-peer lending, trading, and yield generation. While praised for transparency and accessibility, they pose challenges for oversight.
Gary Gensler, SEC Chair, argues that many DeFi platforms aren’t truly decentralized since they involve token distribution and user incentives—features that resemble securities offerings.
In response:
- The SEC plans to expand its Crypto Assets and Cyber Unit to investigate DeFi platforms.
- The EU has launched a DeFi regulatory pilot project to explore how public blockchain data can streamline compliance.
- German regulator Birgit Rodolphe emphasizes that for DeFi to compete with traditional finance, it must adopt robust security and anti-fraud standards.
Industry Leaders Embrace Regulation
Despite crypto’s anti-establishment roots, major players are advocating for clear rules.
Sam Bankman-Fried (SBF), co-founder of FTX, stated: “Engaging with regulators is essential. We aim to build the most transparent and compliant exchange globally.”
Coinbase has gone further, proposing a formal crypto regulatory framework to U.S. policymakers. COO Emilie Choi said: “We want to be treated like other financial institutions—with clear, fair rules.”
Frequently Asked Questions (FAQ)
Q: Why is the SEC investigating BNB?
A: The SEC is assessing whether BNB qualifies as a security under U.S. law. If so, its initial sale in 2017 should have been registered with the commission.
Q: What determines if a cryptocurrency is a security?
A: The Howey Test evaluates whether an investment involves pooling funds with expectations of profit from third-party efforts—commonly applied to ICOs and token sales.
Q: Are all cryptocurrencies considered assets?
A: Most major ones like Bitcoin and Ethereum are increasingly treated as assets due to their speculative nature. However, stablecoins backed by real-world assets may be classified differently.
Q: How do taxes on crypto work in different countries?
A: Germany uses personal income tax rules with holding period exemptions; the UK and South Korea apply capital gains tax; some countries like Portugal currently impose no crypto taxes.
Q: What is MiCA?
A: MiCA (Markets in Crypto-Assets) is the EU’s proposed regulatory framework for digital assets, aiming to standardize rules across member states and enhance investor protection.
Q: Can DeFi be regulated without central control?
A: Regulators acknowledge the challenge but argue that even decentralized platforms often have identifiable developers or token models subject to securities laws.
👉 Stay ahead of evolving global crypto regulations with trusted insights.
As innovation continues to outpace policy, the line between currency and asset grows more complex. Yet one trend is clear: regulatory clarity is no longer optional—it's inevitable. Whether through taxation, licensing, or disclosure mandates, governments are shaping a future where digital assets operate within defined legal boundaries. For investors and builders alike, understanding these shifts isn’t just prudent—it’s essential.