After months of fierce debate over whether or not Bitcoin (BTC) and Ethereum (ETH) should be classified as securities, the U.S. Securities and Exchange Commission (SEC) appears to have finally made a decision.
SEC Director of Corporate Finance William Hinman announced at the Yahoo Finance-hosted “All Market Summit: Crypto” in San Francisco that the financial watchdog would not classify Bitcoin or Ethereum as securities. The SEC does not see Bitcoin and Ethereum fitting into the traditional or digital definitions of how they define a “security.” However, Hinman warned that other cryptocurrencies still could be classified as securities.
“Can a digital asset originally sold in a securities offering eventually be sold in something other than a security?” he asked. “How about cases when there’s no longer a company [involved]? I believe in those cases answer is a qualified yes.”
Hinman said “form is disregarded for substance,” in the SEC’s thinking. The economic realities, he said, are more important than how something is labeled.
“If a cryptocurrency network is sufficiently decentralized and purchasers no longer have expectation of managerial stewardship from a third party, a coin is not a security,” Hinman added.
Similarly, labeling an investment opportunity as a “coin” or a “token” does not make something not a security, Hinman added.”
In other words, Hinman is saying the SEC is not really concerned with names. The focus is on the way in which the asset is sold, marketed, promised, behaves, used, etc. The more decentralized, the better it seems.
“Officials at the Commodity and Futures Trading Commission (CFTC) had long urged the SEC to clarify its position on ether, and the two agencies had been discussing how the currencies were first offered. The CFTC allowed bitcoin futures to be traded last year on three exchanges.”
This is great news for Bitcoin and Ethereum, which have seen a steady flow of bearish trading activity in recent weeks. Over the past hour since the announcement was made, Bitcoin has rallied nearly 4.50% and Ethereum has soared 10.82%, according to CoinMarketCap.com.
The announcement appears to be just the bullish jolt that the overall cryptocurrency markets have desperately needed after several weeks filled with declines. Having this announcement now gives the cryptocurrency community some guidelines and understanding on how the SEC is going to view each coin and token.