¿What would happen if the regulators declared ether as a financial value?
Currently, ether (ETH), the second largest cryptocurrency market capitalization, faces a debate led by the US Securities and Exchange Commission (SEC) and the Commission for Trade in Goods and Futures (CFTC) on how to classify the cryptocurrency in order to regulate it.
The controversy arose from the statements of some high officials of these dependencies. There was even talk of a possible meeting of both governmental organizations to discuss the initial offer of currency (ICO) that the Ethereum Foundation made in 2014.
The ideas of the debate focus on considering whether the ether, the native cryptocurrency of the Ethereum blockchain, is a value or not and the possible consequences of being classified as such by the SEC. A measure that would make the ETH the same as an action or a stock market value, with all the strict requirements of registration, disclosure and accreditation of investors that such a fact entails.
To determine if any type of investment is a security, the US Securities and Exchange Commission uses the Howey test, a parameter that derives from the name of a judicial case that was discussed in the United States in 1946. This same rule is the one that is is using to try to classify the tokens.
Howey's test identifies four fundamental characteristics that help to define a value, among which is offered in exchange for money, that there are profit expectations, that the investment is focused on a common enterprise and that the earnings depend on the efforts of a company. promoter or a third party.
When considering such characteristics, most analysts point out that when applying the test, an ICO responds to the concept of value, in essence, since it approves the four aspects cited. This makes the test a valid tool that helps determine if what the Ethereum Foundation sold to the ICO investors in 2014 were unregistered securities. Although there are other variables to take into account to make the classification, which focus on those who reject government criteria.
In this case bitcoin leaves the debate by not passing the Howey test and it differs from the ether when cataloged by most regulators as a product. This was because there was no pre-launch ICO and the efforts for its creation and propagation came from the miners, the market and the community itself.
In this way, Howey's test constitutes one of the main elements on which the statements offered by the majority of government spokespersons to the media are based, when they try to qualify cryptographic currencies.
In this sense, the president of the Securities and Exchange Commission of the United States, Jay Clayton expressly stated that "Bitcoin is not a value", but a pure means of exchange, although he did not say the same about other cryptoactives, stating that the Most of them are values because they are used to finance projects. In those cases, if they are values, they should be regulated as such, he said.
This same order of ideas is followed by the statements of the former director of the CFTC, Gary Gensler, for whom both the ether and the ripple (XRP) could be declared as financial values "not in accordance" with the legislation, or at least be in a gray area in regulatory matters.
On this, Hester Peirce, commissioner of the SEC of the United States, was a little more moderate and said she was not ready to make a "generalized statement" about the cataloging of cryptocurrencies other than bitcoin. For the commissioner the issue is debatable, since some cryptoactives work as values, others as coins and some as "other things".
In general terms, according to the criteria set forth so far by the regulators, if ETH, XRP -and all those cryptocurrencies that the government estimates- are classified as securities, its investors would have violated the legal and legal apparatus of the United States when issuing and negotiating securities. Financial