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.
That being said, Hinman cautioned that "the analysis of whether something is a security is not static and does not strictly inherent to the instrument". The distinction lies in how the asset is offered or sold to the public. "But the way it is sold - as part of an investment; to non-users; by promoters to develop the enterprise - can be, and, in that context, most often is, a security - because it evidences an investment contract", Hinman stated. Projects will often dance around their token's nomenclature to avoid self-branding as something that could be seen as a security, but Hinman conveyed that the SEC isn't fooled by the verbal footwork.
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The Securities and Exchange Commission said on Thursday that it does not consider the popular cryptocurrency Ether to be a security. Concern in particular had mounted around Ether due to its widespread use and because the Ethereum Foundation initially sold it in a manner that some in the financial industry have said resembled securities offerings. Previously, bitcoin and ether may have been offered as securities (like shares of a company), which would have required registration with the SEC, but a consensus has emerged that they behave and are treated like commodities, similar to gold and oil. "How about cases when there's no longer a company [involved]? I believe in those cases [the] answer is a qualified yes".
The ambiguity means that there is still an opening for the SEC to take action on or regulate other digital tokens.
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"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, Hinman said.
"With this guidance, the SEC is showing that taking a pro-innovation approach does not have to come at the expense of protecting investors", Coin Center Executive Director Jerry Brito said in a statement. At the Yahoo Finance All Market Summit, the government official declared that Ethereum was not a security.
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