Bitcoin and Dogecoin Mining Don’t Violate Securities Law as SEC Gives OK to Proof-of-Work

But major cryptocurrencies such as Bitcoin, Dogecoin, and Litecoin all run on proof-of-work blockchains. For such a blockchain to function, computers around the world race to solve mathematical problems in order to process blocks on the network and process transactions. 

Proof-of-work requires miners, which are typically large, industrial operations—especially with Bitcoin, the biggest and oldest cryptocy. But some people try to mine the asset alone, with Dogecoin and some other less-valuable cryptocurrencies proving easier to mine than Bitcoin. As proof-of-work miners are rewarded with digital coins, the SEC said it wanted to clear up whether or not this would constitute dealing with securities.

According to the regulator, as a miner’s “expectation to receive rewards is not derived from any third party’s managerial or entrepreneurial efforts upon which the network’s success depends,” it does not come under the SEC’s jurisdiction. By adding its computational resources to the network, the miner merely is engaging in an administrative or ministerial activity to secure the network, validate transactions and add new blocks, and receive rewards,” the SEC said.

The regulator did not mention any specific coins or networks by name, but Bitcoin and Dogecoin are the two largest proof-of-work coins by total market cap, with both sitting in the top 10 coins by that metric. Ethereum originally ran on a proof-of-work network, but transitioned to a proof-of-stake model in 2022.