Finally, the US Securities and Exchange Commission has formally declared that Ethereum is NOT a security. And it is taking the same view with other decentralised cryptocurrencies, even if they were initially sold through an illegal securities offer.
Jay Clayton, the SEC chairman who made the announcement “made this revelation in a letter sent to US House Rep. Ted Budd, who had requested that the SEC provide clarity on whether SEC Director of the Division of Corporate Finance William Hinman spoke for the agency when he said that Ethereum was not a security or was merely voicing his own opinion,” CCN reports.
Clayton confirmed that he agrees with Hinman’s analysis of what crypto assets fall under the securities classification, writing: ““Your letter also asks whether I agree with certain statements concerning digital tokens in Director Hinman’s June 2018 speech. I agree that the analysis of whether a digital asset is offered or sold as a security is not static and does not strictly inhere to the instrument. A digital asset may be offered and sold initially as a security because it meets the definition of an investment contract, but that designation may change over time if the digital asset later is offered and sold in such a way that it will no longer meet that definition. I agree with Director Hinman’s explanation of how a digital asset transaction may no longer represent an investment contract if, for example, purchasers would no longer reasonably expect a person or group to carry out the essential managerial or entrepreneurial efforts. Under those circumstances, the digital asset may not represent an investment contract under the Howey framework.”
A major breakthrough for crypto
This is a crucial distinction. A securities classification would have likely seen Ethereum removed from US cryptocurrency exchanges. Furthermore, the SEC had previously warned exchanges that listing illegal securities could find themselves facing repercussions.
Plus, this increased regulatory clarity could further help spur institutional adoption, as questions surrounding cryptocurrencies’ legal status has been identified as one of several roadblocks to convincing more institutions to become active in the crypto space.