William Hinman, Director of the corporate finance division of the United States Securities and Exchange Commission (SEC) SEC, has today affirmed that Ether (ETH) is not a security. Hinman revealed this at an All Markets Summit organized by Yahoo Finance on Thursday, 14 June 2018
Hinman declared that SEC does not see a lot of value in categorizing ETH as a security arguing that the fact there is no company, group or a figure responsible for Ethereum, and consequently ‘’ETH may not represent an investment contract. Remarking on the status of the digital currency, he stated:
“When we think about how ether today is operating, at least, we see a highly decentralized” network, not the type of centralized actor that characterizes securities offerings. In its current state, we do not see any value regulating it.”
Hinman’s remarks were indeed a positive signal to the cryptocurrency market. They sent the value of ETH spiking by more than 9 percent pushing it from $469 to $516 in less than an hour. The price of ETH had earlier dived below $500 on June 13 as the crypto market plummeted over the last one week
Even with the classification of Ether as not a security, the SEC official cautioned on consumers that asset classification could change from time to time. Citing digital currency itself, he described ETH as an “evolving coin.” Additionally, he stated that Bitcoin is also not classified as a security. This statement echoes the declarations made by Jay Clayton, SEC chair during a recent interview. According to Clayton, bitcoin cannot be regarded as securities since it acts to replace sovereign currencies.
According to Hinman Ether might not be classified as a security, but the agency doesn’t appear to be extending that same classification to ICOs tokens. Speaking about ICOs tokens, He said that cryptocurrencies that claim to be Utility tokens still act as investment assets and can be traded as a security. Hinman commented that “It is the SEC’s mandate to regulate the offering and sales of such assets” adding that “merely labeling a token as a utility doesn’t make it not to be a security in the eyes of the Agency.”
Last month, Wall Street Journal (WSJ) published news report suggesting that U.S regulators have declared that ETH is in a regulatory “gray zone.” A greater concern reportedly being raised is how Ether was initially distributed – in a sale of ETH starting in July 2014, the Ethereum Foundation raised over 31,000 BTC, (around $18.3 million at the time) in one of the world’s first ICOs.
Joseph Lubin, the co-founder of the Ethereum, countered this, stressing that ETH would, in fact, fail the test since its users share a stake in a joint enterprise.
“[With] all these different actors providing their resources to run the platform, you need to pay them for [doing so]… This is a way of accessing a shared comput[ing] resource.”