Many investors, traditional and progressive, are looking hard at cryptocurrency investments as a way to diversify their portfolios. However, there are still multiple known “unknowns” about this new market, including the impact of existing and future government regulations concerning investment advisor requirements, export controls, and anti-money laundering. On December 22, 2020, the Securities and Exchange Commission (SEC) filed a complaint against Ripple Labs Inc. (Ripple) and two of its top executives for conducting unregistered, digital securities offerings valued at over $1.3 billion. The SEC’s action could be an indication that the SEC is expanding the scope of its pressure on virtual currency companies, as other government agencies, including the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control, have done over the past few years.

At present, similar to other regulatory agencies, the scope of the SEC’s cryptocurrency regulation is ill-defined. In various agency publications and statements, the SEC has indicated that it will assert jurisdiction over initial coin offerings (ICOs) and securities linked to cryptocurrencies, such as Bitcoin-linked exchange-traded funds. By contrast, in a 2019 CNBC interview, then-acting SEC Chairman Jay Clayton stated Bitcoin was not a security because cryptocurrencies “are replacements for sovereign currencies, replace the dollar, the euro, the yen,” meaning that it’s a “type of currency [and] is not a security.” This statement seemingly placed Bitcoin-like cryptocurrencies outside the purview of the SEC.

But that may change with the SEC’s lawsuit against Ripple. Ripple operates a network allowing for cross-border payments using