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The second in the world popular cryptocurrency is not an investment vehicle, at least according to the Securities and Exchange Commission. William Hinman, director of the corporate finance division agency, said that ether, the currency that powers the Ethereum network, should not be regulated in the same way as stocks and bonds.
His statements are similar to those made in April by the president of the SEC, Jay Clayton, on the bitcoin. Taken together, the two sets of observations provide the clearest understanding of how the regulatory agency views the cryptocurrency market. Basically, when a cryptocurrency becomes sufficiently decentralized, as bitcoin and widely popular ether have, the agency no longer considers it as a security. On the contrary, small initial offers of coins, or ICO, we are almost always titles in the eyes of the SEC. This distinction is important because the securities are subject to the same regulations as normal stocks.
"Based on my understanding of the current state of the ether, the Ethereum network and its decentralized structure, current offers and ether sales are not securities transactions," Hinman told Yahoo's All Market Summit: Crypto in San Francisco. "And, as with bitcoin, the application of the regime of disclosure of federal securities laws to current transactions in ether would seem to add little value".
"Current offers and ether sales are not securities transactions".
William Hinman, SEC
Joe Lubin, co-founder of Ethereum and founder of CosenSys, one of the major application companies of Ethereum, says he is grateful for the SEC decision. "We appreciate the clarity provided today by Director Hinman and the SEC," Lubin said in a statement. "Ether and other next-generation consumer tokens will continue to evolve the Web to more equitable, secure, and evenly distributed networks. ConsonsSys looks forward to continuing to engage with regulators around the world to promote responsible adoption of this processing technology. "
Hundreds of different developers run applications on the Ethereum network and contribute to its code. A similar number, if not more, helps to develop Bitcoin. "The network and software development are decentralized enough that there is no visible third party on which we would expect investors to be confident," says Peter Van Valkenburgh, director of research at the Coin Center, a policy-focused think tank. afflict blockchain technology. This is an important distinction from traditional titles, like those of Apple or Microsoft, in which you bet on the efforts of a specific company to develop products and services and generate income.
In particular, the SEC Hinman has ceased to declare that initial investments in ether were not securities. It is possible that investments made in advance, before the currency became truly decentralized, could still be considered traditional investment vehicles. "The director was clear enough not to be definitive about this business," says Van Valkenberg, who also suggests that this indicates that the people who first came in – and probably made more money – could one day regulate the face.
Hinman also said that other cryptocurrencies could become "sufficiently decentralized" in the future, to the point that "it may not be necessary to adjust the tokens or coins that work on them as securities". But this does not mean that all cryptocurrencies can escape the scrutiny of US regulators. The SEC has stated that most of the so-called token and ICO sales are likely to be regulated, as they generally feed the product or the application of a single startup. ICOs are opportunities for investors to buy tokens that feed the blockchain, usually before its product becomes available.
Complicating the problem: many tokens run on the top of the Ethereum network itself. So while buying and trading ether is not seen as a traditional investment, the purchase and sale of specific tokens that are on top of that network would be.
In recent months, the SEC has stepped up its efforts to fight against the fraudulent schemes of ICO. In December, the new cyber unit of the agency announced that it had filed its first complaint, against the cryptocurrency PlexCorps, for alleged fraudulent customers of $ 15 million. A month later, he stopped one of the biggest ICOs ever, based on the Dallas AriseBank.
This does not mean that all cryptocurrencies can escape the scrutiny of US regulators.
In February, the SEC told the Senate Banking, Housing and Urban Affairs Committee that it was open to "exploring with Congress, as well as our federal and state colleagues", whether to regulate the cryptocurrency exchanges, the websites that allow customers to convert and exchange different coins for a fee.
And then in April, the agency blamed the two founders of an ICO that raised over $ 32 million, allegedly selling fraudulent and unrecognized investments. The scheme had received testimonies from professional boxer Floyd Mayweather and music producer DJ Khaled.
The owners of bitcoin and ether, however, appear safe from that type of close examination. This does not mean that investing in both cryptocurrencies is necessarily safer. Researchers at the University of Texas found that a price manipulation campaign could partially justify a bitcoin price increase last year, for example. All that the SEC statements really say is that you are betting on an entire ecosystem, rather on a single player.
Predictably, however, both ether and bitcoin prices have increased on Thursday, probably in response to the news.
