Based on my understanding of the present state of Ether, the Ethereum network, and its decentralized structure, current offers and sales of Ether are not securities transactions.
This is the statement by a top official at the U.S. Securities and Exchange Commission.
A top official of SEC, William Hinman, while talking earlier today at the Yahoo Finance All Markets Summit: Crypto, stated that Ether, the Ethereum network’s token, isn’t a security. Hinman, who is director division of affairs at SEC added that Ether wouldn’t be regulated as a security by the agency using the current structure.
When we think about how Ether today is operating, at least, we see a highly decentralized network, not the type of centralized actor that characterizes securities offerings and in its current state, we don’t see value regulating it.
Hinman also noted that regardless of the way Ether was first issued, the Ethereum network has grown to become sufficiently decentralized that it no longer had a controlling unit, adding that assets that are usually sold as securities tend to have the ability to lose the security tag along the way.
Hinman also stated that Bitcoin isn’t a security due to the nature of the network. However, he warned;
The analysis of whether something is a security is not static and does not strictly inherent to the instrument. Even digital assets with utility that function solely as a means of exchange in a decentralized network could be packaged and sold as an investment strategy that can be a security.
Regarding tokens that claim to be utility tokens, Hinman had this to say;
Let me emphasize an earlier point: simply labeling a digital asset a ‘utility token’ does not turn the asset into something that is not a security.
Ethereum and Ripple earlier regarded as securities byformer CFTC Chairman
The debate on whether Ethereum and Ripple are securities have been waging on for a long time now in the cryptocurrency world. Back in April, a former chairman of the Commodity Futures Trading Commission (CFTC) predicted Ethereum and Ripple could probably be classed as securities by SEC, though he claimed that Bitcoin Litecoin and Bitcoin Cash don’t fall under that category.
Gary Gensler made this known back the in an interview with the New York Times where he stated;
There is a strong case for both of them — but particularly Ripple — that they are noncompliant securities. Over 1,000 previously issued initial coin offerings, and over 100 exchanges that offer ICOs, are going to need to sort out how to come into compliance with U.S. securities law.
Ethereum had defended its position and always maintained that it is not a security. The head of the Ethereum Foundation, Aya Miyaguchi, while talking to press, stated that;
The Ethereum Foundation neither controls the supply of, nor has the ability to issue Ether, and the quantity of Ether that the foundation holds (under 1 percent of all Ether) is already lower than that held by many other ecosystem participants, thus that doesn’t qualify them as a security.
Ripple still hasn’t been cleared
Even though Ripple has defended claims of XRP being a security, it still hasn’t been cleared. After the claims by Gensler, Ripple spokesperson, Tom Channick gave a rather weak argument of its position, stating;
XRP does not give its owners an interest or stake in Ripple, and they are not paid dividends. XRP exists independent of Ripple, was created before the company and will exist after it.
With Ethereum now cleared, all attention will be focused on Ripple and the decision of SEC regarding its position as a security or otherwise.
Bitcoin was never considered as a security
Ethereum and Ripple were the cryptocurrencies considered as security, with SEC Chairman Jay Clayton revealing on several occasions that Bitcoin isn’t a security. In a recent interview last week, Clayton maintained that Bitcoin isn’t a security, though he classified ICO tokens as securities.
On Bitcoin not being a security, he stated;
These are replacements for sovereign currencies, like, the dollar, yen, euro, etc. This type of cryptocurrency is not a security.
He maintained that ICO tokens are securities, he said;
A token, a digital asset where I give you my money, and you go off and make a venture, like a company, and in exchange, you say you know what, I’m going to give you a return, or you can get a return on the secondary market – that’s a security, and we [the SEC] regulate that. We regulate the offering of that security, and we regulate the selling of that security.
Ethereum price to surge kigher
The price of Ethereum has slipped below the $600 mark a few days ago and with the bear cycle still in play, ETH has been struggling for momentum. The news that Ethereum is not a security has spread through the cryptocurrency world instantly, with traders on social media platforms like Reddit and Telegram, of the belief that Ethereum price would bounce back to the $600 region very soon.