SEC: Ethereum is too 'decentralized' to be considered a security

17 June, 2018, 12:55 | Author: Brooke Harris
  • U.S. Securities and Exchange Commission Director Division of Corporation Finance William Hinman

Hinman in his speech mentioned the agency would not change its rules concerning digital assets, but though Ethereum had fallen under the category "Securities", but there has been a general agreement that the token, alongside the bitcoin cryptocurrency is similar to commodities, such as gold and crude oil. When a project becomes truly decentralized Hinman believes "in these cases the answer is a qualified "yes". Initial investors in ether have also benefited from a spike in the cryptocurrency's price. He said, "Over time, there may be other sufficiently decentralized networks and systems where regulating the tokens or coins that function on them as securities may not be required".

"When we look at how Ether today is operating we see a highly decentralized network, and we don't see a central third party", SEC official William Hinman said at a Yahoo Finance summit on cryptocurrency in San Francisco on Thursday.

What do you think about this surprise declaration by Hinman? Ether, backed by the company Ethereum, spiked almost 9 percent on Hinman's statement, rising to more than $520 on CoinDesk. Soon after the SEC executive made the statements, cryptocurrency markets saw some gains as BTC rose $350 immediately after the news went public. Addressing the audience comprising crypto enthusiasts and investors, he stated, "We don't see a lot of value in seeing ether as a security". "As with bitcoin, applying the disclosure regime of the federal securities laws to current transactions in ether would seem to add little value".

Mr. Hinman also informed the attendees that other crypto could still be considered securities.

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"The SEC's recent comments are a validation of the possibility of non-securities tokens and a big step towards more definitive guidance on how and when individual tokens can be defined as non-securities". It's now widely used in new crypto projects across the globe and some anxious that if the regulator subjected it to securities rules that those efforts would have been disrupted. President of CBOE, the creators of the bitcoin futures contract, Chris Concannon told bloomberg that this decision increases the chances of an ETH contract being signed off by regulators.

"This announcement clears a key stumbling block for tther futures, the case for which we've been considering since we launched the first bitcoin futures in December 2017". The CFTC allowed bitcoin futures to be traded past year on three exchanges. This likely means exchanges like Coinbase will stay skittish about adding XRP for now.

The second reason for the SEC's pronouncement on ether is the current decentralized state of ethereum's network.

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