A SEC spokesman has stated in a recent speech that Bitcoin (BTC) and Ethereum (ETH) are not securities, however, ICOs are securities and they are therefore under the regulatory purview of the SEC. Bitcoin’s and Ethereum’s higher level of decentralization was cited as the reason why they were not classed as securities.
At the Yahoo All Markets Summit: Crypto conference in San Francisco, William Hinman, a SEC regulatory spokesperson explained in a speech that the biggest challenge in deciding if cryptocurrencies and ICOs are securities is whether there is an expectation of profits from a third party. Also if the investors in the cryptocurrency have an expectation of profits the asset could be classed a security. He stated:
“Central to determining whether a security is being sold is how it is being sold and the reasonable expectations of purchasers,”
Hinman explained that the higher the level of centralization the greater chance of the cryptocurrency being classed a security. He explicitly said Bitcoin was not a security due to its high level of decentralization, and went on to add that Ethereum was not a security for the same reason.
LIVE: SEC's Hinman on Ether: “Based on the my understanding on Ether… we believe current offers and sales of Ether are not securities transactions.” https://t.co/rokuCGgFcK #YahooAMS pic.twitter.com/k5XsBwJsQU
— Yahoo Finance (@YahooFinance) June 14, 2018
Relief for Ethereum Ecosystem
Industry experts already believed Bitcoin to not be a security, however there was significant uncertainty over how the SEC would class Ethereum. It raised $18 mln in 2014 via an ICO which worried many investors who thought it would be in breach of the relevant US securities laws.
Due to the large number of Ethereum ICOs and DApps, its status as a security has long been a source of doubt for the entire Ethereum ecosystem of ICOs and DApps that rely on Ethereum. According to CryptoCompare data the markets have reacted strongly to the news and in under 1 hour Ethereum has risen 10% to over $520.