Ethereum is not a security: more on the background

The crypto community has been waiting for this decision for some time. The risk has always been that Ethers would be deemed a security, and investors and the Ethereum Foundation therefore subject to the harsher regulation. This would inevitably have hit the market hard and been a concerning precedent for other platforms and crypto as a whole.

Whilst it’s always been obvious that many (or most) ICOs are securities — clearly meeting the definitions laid down by the Howey test — and that bitcoin is not, Ether has always sat in a grey area. It was crowdfunded, and those who backed it to the tune of $16 million not only expected to benefit, they have received a handsome ROI. At the same time, there’s no single company generating profits, and it’s a decentralised network supported by thousands of miners, like bitcoin.

At a meeting at the Yahoo Finance All Markets Summit: Crypto on Thursday, the SEC’s Head of Corporate Finance, William Hinman, stated: ‘Putting aside the fundraising that accompanied the creation of Ether, 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.’

It’s fitting that the key criteria for the SEC appears to be decentralisation: the guiding principle of the crypto world. If there is a significant degree of centralisation — like a company that crowdfunds investment for a new application, and which will somehow generate profits for investors — then that will almost certainly be deemed a security. But any sufficiently decentralised project, which will likely include most altcoins, will fall outside the necessary criteria.

The message for new crypto projects should be clear: pay careful attention to your business model if you want to avoid regulatory attention. Only truly decentralised, community projects will slip through the net.

The others? Be afraid.

Read more at https://bravenewcoin.com/news/word-on-the-street-a-market-miracle-out-of-the-ether-or-yahoo/

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