The director of corporate finances of the Securities and Exchange Commission (SEC), Willian Hinman, declared today that Bitcoin, the most popular and the first cryptocurrency ever; and Ethereum, the second most known cryptocurrency in the whole world, would not be considered as securities. He declared this on a speech at the Yahoo Finance conference that was held in San Francisco, today.
The Securities and Exchanges Commision, being the USA watchdog, had cast doubts before about if Ethereum could be considered as a security, due to their broad involvement in the Initial Coin Offering market, because most of ICOs run on top of the Ethereum network, and use their smart contracts feature. they had referred to Bitcoin before as the only coin that was not a security, and their declarations today seem to confirm this.
The speech that William Hinman gave in the conference referred to the consideration of Initial Coin Offerings as securities, and how about this consideration was not static, as it could change within the asset life. About Ethereum, he declared that with decentralization, the relation between promoter and investor dilutes; about this, he stated that:
“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.”
For him, the for an instrument or a cryptocurrency to be classified as a security there must be a third party acting in the interest of an investor mass. And for bitcoin, also, there was nothing such as a crowdfund whatsoever. Abut this crypto asset, he stated:
“WHEN I LOOK AT BITCOIN TODAY, I DO NOT SEE A CENTRAL THIRD PARTY WHOSE EFFORTS ARE A KEY DETERMINING FACTOR IN THE ENTERPRISE. THE NETWORK… APPEARS TO HAVE BEEN DECENTRALIZED FOR SOME TIME, PERHAPS FROM INCEPTION. APPLYING THE DISCLOSURE REGIME OF THE FEDERAL SECURITIES LAWS TO THE OFFER AND RESALE OF BITCOIN WOULD SEEM TO ADD LITTLE VALUE”
These are good news for the cryptocurrency world and mostly for the Ethereum, that still had doubts about if the regulators would consider their token a security asset class. If the SEC had classified Ethereum as a security asset class, it should have been retired from USA exchanges that were not registered as securities brokerages, causing a market disruption and possibly a huge drop on its market price.