{"id":21948,"date":"2018-06-14T18:32:37","date_gmt":"2018-06-14T18:32:37","guid":{"rendered":"http:\/\/ci027cfe80d00026c3"},"modified":"2018-06-14T18:32:37","modified_gmt":"2018-06-14T18:32:37","slug":"sec-director-corporate-finance-ether-not-security","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/business\/sec-director-corporate-finance-ether-not-security","title":{"rendered":"SEC Director of Corporate Finance: Ether Is Not a Security"},"content":{"rendered":"
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In an informal statement made at Yahoo Finance\u2019s All Market Summit: Crypto<\/a>, William Hinman, the United States Securities and Exchange Commission (SEC)\u2019s director of corporate finance, indicated that the regulatory agency has no plans to deem ether a security.<\/p>\n

\u201c… 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,\u201d Hinman said in a speech<\/a> at the summit. <\/p>\n

Along with ether, Hinman stated that the SEC would not classify bitcoin as a security, either. Rather, both cryptocurrencies function similar to commodities like gold, silver or oil, the agency believes.<\/p>\n

But not all coins are created equal, Hinman expressed in his speech, and the SEC\u2019s leniency on crypto\u2019s top assets won\u2019t relieve tokens from scrutiny. Tokens and Initial Coin Offerings, he continued, are most likely to be considered securities. The distinction lies in how the asset is offered or sold to the public.<\/p>\n

\u201c\u2026 strictly speaking, the token \u2014 or coin or whatever the digital information packet is called \u2014 all by itself is not a security \u2026 But the way it is sold \u2014 as part of an investment; to non-users; by promoters to develop the enterprise \u2014 can be, and, in that context, most often is, a security \u2014 because it evidences an investment contract,\u201d Hinman stated.<\/p>\n

This analysis seems to prioritize circumstance over semantics when deeming a token\u2019s securities status. Projects will often dance around their token\u2019s nomenclature to avoid self-branding as something that could be seen as a security, but Hinman conveyed that the SEC isn\u2019t fooled by the verbal footwork. He made it clear in his speech that \u201csimply labeling a digital asset a \u2018utility token\u2019 does not turn the asset into something that is not a security \u2026 the economic substance of the transaction always determines the legal analysis, not the labels.\u201d<\/p>\n

Hinman appeared to contradict himself when he dove into an analysis of token sales likely falling under the blanket of securities, only to dismiss ether from this classification. But this absolution comes from \u201cputting aside the fundraising that accompanied the creation of Ether,\u201d he said, as a token or coin can\u2019t be deemed a security if no central organization or company is directing it after launch.<\/p>\n

\u201cCan a digital asset originally sold in a securities offering eventually be sold in something other than a security?\u201d he posits, eventually concluding that it cannot. \u201cBut what about cases where there is no longer any central enterprise being invested in or where the digital asset is sold only to be used to purchase a good or service available through the network on which it was created? I believe in these cases the answer is a qualified \u2018yes.\u2019\u201d<\/p>\n

The speech shed substantial clarity on a question that has loomed over the industry for some time: namely, whether or not ether would be ruled as a security. And, while this speech is sure to quell the anxieties of enthusiasts and investors alike, it leaves a gray area open for the SEC to color in its treatment of each individual token and coin under Hinman\u2019s interpretation.<\/p>\n

Still, the developments are positive for an industry that, in the context of the United States, has made a slow crawl toward regulatory legitimacy.<\/p>\n

\u201cWe are glad the SEC agrees with our long held analysis of how securities law applies to decentralized cryptocurrency networks like Bitcoin and Ethereum,\u201d Coin Center Executive Director Jerry Brito said in a statement. \u201cWe are thrilled to see it take a strong pro-innovation approach to this nascent technology. With this guidance, the SEC is showing that taking a pro-innovation approach does not have to come at the expense of protecting investors.\u201d<\/p>\n

While the words carry weight from one of the SEC\u2019s highest officials, it\u2019s worth noting that they were spoken somewhat informally and may not represent a cohesive message across the SEC\u2019s regulatory staff. <\/p>\n

This morning, Valerie Szczepanik, the SEC\u2019s first crypto czar, issued what looks like a caveat on this front, stating in a panel at the summit that individual staffer comments may not be wholly in line with the SEC\u2019s official stance.<\/p>\n","protected":false},"excerpt":{"rendered":"

“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.”<\/p>\n","protected":false},"author":3468,"featured_media":21949,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[2037,2287,183],"class_list":{"0":"post-21948","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-ether","9":"tag-ico","10":"tag-sec"},"author_data":{"id":3468,"name":"Aaron Van Wirdum And Colin Harper","nicename":"aaron-van-wirdum-and-colin-harper","avatar_url":"https:\/\/secure.gravatar.com\/avatar\/88b6c65a7515990786b1c04473e15469e5b0d0fffef947ed629a60854e1cb426?s=96&d=robohash&r=g"},"featured_image_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/11\/sec-director-of-corporate-finance-ether-is-not-a-security.jpg","_links":{"self":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/21948","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/users\/3468"}],"replies":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/comments?post=21948"}],"version-history":[{"count":0,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/21948\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media\/21949"}],"wp:attachment":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media?parent=21948"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/categories?post=21948"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/tags?post=21948"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}