Newsflash: SEC Director Says Ether Is Not a Security

Irving Hamilton
June 15, 2018

The price of ether rose on Thursday after a senior official at the U.S. Securities and Exchange Commission stated that the cryptocurrency was not a security, thus exempting certain transactions in the token from federal securities laws.

Speaking at Yahoo Finance's All Market Summit, William Hinman, the SEC's director of corporate finance, said the agency does not view bitcoin and ethereum as securities. While Ripple has said in the past that XRP tokens aren't securities, some believe that the company's centralized nature and control over the coins could put it under the SEC's jurisdiction.

Hinman said that the SEC will not be changing cryptocurrency and digital asset rules, but rather would be applying them.

Similarly, labeling an investment opportunity as a "coin" or a "token" does not make something not a security, Hinman added. The distinction lies in how the asset is offered or sold to the public. While a token in and of itself may not be a security, the purchaser's expectation during a sale will determine its classification, he said. Such a view has been advanced largely by former regulators, while the SEC has largely spoken generally (and sometimes derogatorily) about ICOs and token sales. The economic realities, he said, are more important than how something is labeled.

The statements are the latest in a long line of remarks that have found various regulatory officials opining on whether the nature of the sale in which ether was issued made it subject to USA securities laws.

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A SEC spokesman has stated in a recent speech that Bitcoin (BTC) and Ethereum (ETH) are not securities, however, ICOs are securities and they are therefore under the regulatory purview of the SEC.

"Can a digital asset originally sold in a securities offering eventually be sold in something other than a security?" he asked. "But what about cases where there is no longer any central enterprise being invested in or where the digital asset is sold only to be used to purchase a good or service available through the network on which it was created? I believe in those cases the answer is a qualified yes".

Still, the developments are positive for an industry that, in the context of the United States, has made a slow crawl toward regulatory legitimacy.

When we think about how ether today is operating, at least, we see a highly decentralized network... "We are thrilled to see it take a strong pro-innovation approach to this nascent technology".

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