William Hinman, The Head of the Division of Corporation Finance at the SEC, in a speech at the Yahoo All Markets Summit, a Crypto conference in San Francisco said:
“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,”
Hinman emphasized his beliefs stating that Bitcoin is not a security since it is decentralized. He further added saying that there is no central party whose efforts are a key determining factor in the enterprise. He even explained how Ethereum [ETH] is not a security as even Ethereum network is decentralized.
Hinman at Yahoo’s All Market Summit: Crypto in San Francisco, said:
“Central to determining whether a security is being sold is how it is being sold and the reasonable expectations of purchasers”
Hinman further explained that the main issue in deciding if digital forms of money and ICOs were securities are tied by the expectations of a return by the third party, particularly whether there was an individual or gathering that supported the creation and sale of the asset, and who played a critical part in its improvement and development.
For buyers of the offered asset, the key is whether they are looking for a return on the investment.
When it comes to ICOs, the SEC employee acknowledged that digital assets could be more structured and organized. It could be made as a consumer product rather than a security, specifically if the asset is purchased for personal use and not intended as an investment.
Defending SEC’s strict interpretation of securities laws, Hitman said:
“There is excitement and a great deal of speculative interest around this new technology. Unfortunately, there also are cases of fraud.”
In an interview with CNBC, Jay Clayton, the Chairman of the SEC spoke about the status of the cryptocurrency market as securities. He also spoke about blockchain and Distributed Ledger Technology.
Clayton, in another interview with CNBC, stated that most ICOs are securities. He said:
“Thats our job [regulation] and we’ve been doing it for a long time. If its a security were regulating it. We’ve built a 19 trillion dollar economy on these rules…a securities market that’s the envy of the world.”
The world’s popular cryptocurrencies are not an investment vehicle, at least according to the Securities and Exchange Commission.