On March 20, the Securities and Exchange Commission announced that Bitcoin mining does not fall under securities and does not require registration.
In a statement, the SEC’s Corporation Finance division said that “protocol mining” on the Proof of Work (POW) network does not meet the criteria for “investment agreements” under the Howey Test, a legal standard for determining securities.
The announcement clears the fog for miners and mining companies and says mining operations are not subject to the securities law.
According to the SEC, Bitcoin Miners are not engaged in investment activities that rely on the management efforts of others, whether solo or part of the mining pool. Instead, miners independently contribute their computing power to protect their networks, validate transactions, and earn rewards in the form of newly created Bitcoin.
“The miners’ expectations of receiving compensation are not derived from the efforts of third-party managers or entrepreneurs on which the network’s success depends,” the statement revealed.
The SEC further stated that mining pools that aggregate computational resources to increase the likelihood of mining new blocks will not change the fundamental nature of mining.
Even in the pool, “individual miners still carry out their actual mining activities by providing computational power to solve cryptographic puzzles.” The pool operators primarily provide management functions and distribute rewards proportionately to contributors.
The SEC decision is for both individual miners and mining pools. Solominers validate transactions and earn Bitcoin from their own computing resources.
The mining pool consists of several miners who share resources and are rewarded for getting a better chance to solve puzzles. Mining is dedicated to calculation power rather than relying on others’ efforts, so the mining pool and its operators are not considered securities issuers, the agency also confirmed.