For months now, the cryptocurrency community has been waiting for the Security and Exchange Commission in the United States to take a stance on cryptocurrencies. The argument regarding whether cryptocurrencies are securities or not has been on ground between the CFTC and the SEC. Yesterday, however, a SEC representative that deals with affairs relating to cryptocurrencies and initial coin offerings, William Hinman said that Bitcoin and Ether are not securities.
Bitcoin and Ether are Not Securities But Many Other Cryptocurrencies Are
While William Hinman cleared Bitcoin and Ether, he also said that even if Bitcoin and Ether are not considered securities by the SEC, some other cryptocurrencies fall under this category and would be treated like securities. During the Yahoo All Market Conference that took place in San Francisco, Hinman, who is the director of Corporate Finance at the Securities and Exchange Commission said:
“It is important to determine the sale and method of sale of securities as well as the expectations of purchasers.”
Hinman noted that the main issue when it comes to determining whether ICOs and cryptocurrencies are securities is the presence of a third party awaiting return. That is to say the SEC considers whether there is a group or individual behind the creation and maintenance of the product that expects return. When it comes to purchasing assets, the commission considers if the creators seek return on the investment.
Any asset that has a centralized third party and purchasers that expect a return of investment is most likely a security. Hinman also talked about other instances that would make cryptocurrency free from purview of the Securities and Exchange Commission.
During his speech, he said that a key factor that is used as a criteria is decentralization. He said that Bitcoin and Ether cannot be considered as securities since both platforms are decentralized. Decentralization is a significant factors in determining cryptocurrencies that are securities.