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Oversight by the SEC requires issuers to abide by rules on registering and offering securities. A scheme may qualify if it passes the "Howey test". This requires that “the investment of money” is accompanied by “a reasonable expectation of profits”. The only news in the SEC’s announcement is that it has applied the security designation to a specific offering.
The price drop highlights the suspicion with which crypto currency markets view any form of regulatory encroachment. But this view is naive. Banks are hoping to use the technology to increase efficiency, reduce costs and widen their profit margins. If starry-eyed libertarians truly want to challenge the established financial institutions, they should welcome the imposition of sensible regulatory rules. Only trusted oversight can lend the legitimacy required for widespread adoption.
https://www.ft.com/content/60dbcc02-7361-11e7-93ff-99f383b09ff9
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