SEC rules that BTC and ETH are not securitiesPosted on: June 15, 2018, by : Sean Hughes
SEC rules that BTC and ETH are not securities, but leave speculation over other Cryptocurrencies.
By: Johnny Kmetz, MS
CSO and Co Founder Biterra Capital
June 14, 2018
A huge concern of all crypto traders, especially those residing within the United States, is the possibility of the Securities Exchange Commission (SEC) deciding to hand down some firm regulation –which undoubtedly, could have shook the market even more than what we’ve been experiencing. Anyone HODL’ing BTC, ETH, and LTC knows how rough of a week it’s been for the Crypto market. Months of speculation has brought down the value of the biggest two cryptocurrencies, Bitcoin and Ethereum. Down over 27% and 35% and since May, respectively, and LiteCoin also taking a hit, dropping to $93 after holding steady around $120 (values and price data taken from Coinbase). however –a recent decision by the SEC may have just initiated its rebound.
Speaking at the Yahoo Finance’s All Market Summit, William Hinman (Director of Corporate Finance for the SEC) said: “When I look at Bitcoin today, I don’t see a central third party whose efforts are key factor to determining the success of that enterprise. The network on which Bitcoin functions is operational and appears to have been decentralized for some time… Moreover, putting aside the fundraising that accompanied the creation of Ethereum, based on my understanding of the present state of Ether, the Ethereum network, its decentralized structure, we believe that current offers and sales of Ether are not securities transactions….”
So what does this mean for us?
The Commodities Futures Trading Commission (CFTC) has repeatedly asked the SEC for clarification on the status of Ether, and William Hinman’s words put an end to months of speculation, in which markets were fearful of a heavy regulatory crackdown. Bitcoin, which was not issued in an ICO, was already regarded as a commodity rather than a security, although the statement helps to clarify the situation, but Ethereum presents a more complicated situation because of the circumstances of its ICO. Although the token currently has utility, there was some concern that its speculative nature might have caused the SEC to consider it a security. And to muddy the waters further, there was no “single” third party promoter: Ethereum was a community effort, in a way that most contemporary ICOs are not.
What happens next?
Markets are already celebrating the news, with ETH seeing a 9.29% gain and BTC rallying 4.75% in a matter of hours following the statement by Hinman. While these trends are good news, it may be too early for celebration.
While this decision is great news, popular crypto currencies such as Ripple (XRP) and other alt coins are still in limbo and subject to further speculation following William Hinman’s speech. His words emphasized that most initial coin offerings are securities, and this stance is consistent with the signals from top SEC leadership. SEC Chair Jay Clayton said yesterday: “Much of what I have seen in the ICO or token or ICO space, is a security offering. I don’t know how much more clear I can be about it.”