The SEC declares Ether not a security

in #ether3 years ago

The crypto world may have finally gotten some much need regulatory clarity.

In news out yesterday during the Yahoo Finance All Markets Summit, the SEC finally gave us all a glimpse into their thinking regarding cryptocurrency regulation.

Specifically, the director of corporate finance at the SEC, William Hinman, said that the Ethereum network and Ether do not currently constitute securities.

William Hinman's quote can be seen here:

“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. And, as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value.”

(Source: https://thenextweb.com/hardfork/2018/06/15/ethereum-sec-securities/)

That sounds pretty definitive that Ether is not currently a security.

Keep in mind that this was not technically an official SEC stance, but it was an opinion of a high ranking SEC official and likely one shared by the rest of the agency.

(Source: https://bitsonline.com/sec-suggests-ether-no-security/)

More than just Ether could be off the hook?

Take a look at some more of Hinman's quotes to get a further glimpse into how the SEC may be classifying securities:

"If the network on which the token or coin is to function is sufficiently decentralized – where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts – the assets may not represent an investment contract. Moreover, when the efforts of the third party are no longer a key factor for determining the enterprise’s success, material information asymmetries recede. As a network becomes truly decentralized, the ability to identify an issuer or promoter to make the requisite disclosures becomes difficult, and less meaningful."

(Source: https://thenextweb.com/hardfork/2018/06/15/ethereum-sec-securities/)

Interesting.

That seems to indication the amount of decentralization plays a role into whether a coin is considered a security or not.

Now that we know what the SEC says is not a security, what might make a coin a security?

Besides selling something akin to equity in a project, Hinman gave this quote regarding an example of what may be considered a security by the SEC:

“If a promoter were to place Bitcoin in a fund or trust and sell interests, it would create a new security. Similarly, investment contracts can be made out of virtually any asset (including virtual assets), provided the investor is reasonably expecting profits from the promoter’s efforts.”

(Source: https://thenextweb.com/hardfork/2018/06/15/ethereum-sec-securities/)

This is one example of something considered a security by the SEC, but by all means is not all encompassing.

My non professional opinion is that the recent comments from the SEC may also get many of the current cryptocurrencies off the hook from being classified as securities.

For ICOs going forward, that is another question all together.

Tom Lee of Fundstrat said that in his opinion the recent statement from the SEC makes roughly 65% of the current crypto space commodities.

(Source: https://twitter.com/fundstrat/status/1007622999984357376)

Will this be the clarity needed to get institutions to start entering the space?

I am hopeful this is a step in that direction.

Stay informed my friends.

Image Source:

https://www.reuters.com/article/us-cryptocurrencies-ether/u-s-sec-official-says-ether-not-a-security-price-surges-idUSKBN1JA30Q

Follow me: @jrcornel

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Security or Not Security; that is the Question!
🧐🧐🧐🧐🧐🧐🧐🧐🧐🧐🧐🧐🧐🧐

We all knew this would be th case, but yet the fud monsters still made a killing shirting the market.

We didn't know for sure, though we were 90% certain. This removes that last 10% of uncertainty :)

i heard from someone who has conversations with people at his level regularly at a thanksgiving party that bitcoin was dead not because the establishment wanted to kill it, but because they were coming out with their own. People underestimate the establishment entirely when it comes to this. Sure they may have laughed at us in the beginning and pushed crypto aside, but now that they have seen what's possible they are fully on board and will not let anything stop it from progressing to the point that we all want to be.

Unless they can decentralize it, it will fall flat on its face. That is the problem most of these coins face, they have trouble reaching bitcoin's level of decentralization, even if it's not perfect.

Wake up dude, its not 2012 anymore. only about 5% of the market gives a shit about decentralization.

Lol without decentralization what exactly is a blockchain good for? It's basically just a very inefficient and expensive database without it.

a centralized blockchain can still be public, and to an extent immutable. And tbh the immutable nature of crypto due to cost limitations does not affect players at the nation-state/super corp level.

because they were coming out with their own. People underestimate the establishment entirely when it comes to this.

I wrote a post on this topic recently. It will be decentralized under the name FEDCOIN...We can't make this stuff up...lol...

U.S. Government Joining Blockchain

Good observation.

Peace.

Actually i do believe that this makes it official
https://www.sec.gov/news/speech/speech-hinman-061418
you should also change your citation to this instead

oh, and you're welcome

Lol thanks?

This is definitely a step in the right direction. But the SEC would have to make an official statement to this effect and also be very clear, on paper, what constitutes a Security. I think once that is in place then that is where we will start seeing an influx of institutional money hitting the space. But, if anything, this is a step in the right direction indeed. I'm hopeful

The link in the comment right above yours looks like it is pretty close to what you are wanting to see.

https://www.sec.gov/news/speech/speech-hinman-061418

once that is in place then that is where we will start seeing an influx of institutional money hitting the space.

I totally agree. That's why some of the 'big Wall Street players' are buying into and supporting BTC in grand form. They KNOW that in a few years tax laws and regulations will be in legal writ, protecting their assets.

BTC will be a competitor of fiat; but, without regulations, smh...it's going to be tough to sustain long-term which is prolly why most promote it as a HODL-type investment.

That said, STEEM will be a good promo-tool for the asset; thus, will gain in value on a less momentous, but still, stable form of 'investment'. Of course, this is jmho!

Peace.

That is the hope of most HODL'ers :)

Oh This is a very Allarming news for those people who has Ethereum and especially Ethereum Holder who wants to Hold Ethereum for long time

Still waiting for the clarity. Which agency is going to declare jurisdiction, now that the SEC abdicated? What rules will it institute?

My guess is they enforce current securities laws going forward. "Sorry, we are asleep at the wheel before, but no more free passes."

Looks bad for ICOs. But I'm still concerned about Etherium and other utility tokens. Who's going to regulate them and how?

Thanks jrcornel, for the information, it really gives me more clarity on cryptos so going forward you would have to make sure the crypto you buy is not attach to any interest or else it is a security. I think I understand.

I wish it were that simple. I imagine we will continue to get more and more clarity going forward. My big takeaway was that most ICOs will likely be considered securities while most existing cryptos likely are not, even if they were when initially launched.

I thank you jrcornel for replying but when an ICO is launched, they do not put on their white paper. “If you buy my ICO, you will get a good return” but when you think about it we cannot confuse the old system which is interest based so the SEC has a major problem.

Too many people see SEC and ETH in the same sentence and assume it's a bad thing lol.
Thanks for the thoughtful article!

Wow cant't believe not jut ether but cryptocurrencies, in general are not considers securities. One day they will be. Specially something like bitcoin that used to be under a dollar and went above $15,000 at one time. This all within 10 years , that's what certain stocks do. Very volatile. The question is, what is the real value of bitcoin? That question is more then just supply and demand, among other things. Although, i believe bitcoin and other altcoins will rise back in the next couple months, i'm still not investing large volumes of money. Definitely not a crypto experts. I prefer trading securities. Unless i get them free of course!

This is great news as it allows ETH to keep growing without strict regulations from the SEC!

Awesome nice post @jrcornel! My friend have created awesome Steemit t-shirt and I want to share it with our amazing community! More detailed pictures here:
https://teespring.com/steem-to-the-moon
front (7).jpg

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