William Hinman, the United States Securities and Exchange Commission’s head of corporate finance this week during a San Francisco Markets Summit event made statements that may probably change the cryptocurrency community. He couldn’t have offered the digital currency market kinder words after saying:
“Putting the fundraising event that accompanied Ether’s creation aside, and based on my understanding regarding the present state of the network, the Ethereum Blockchain, its decentralised structure, present offers and the sales of its token aren’t classified as securities transactions.”
The news of Hinman’s comments eventually rallied the cryptocurrency market, although other tokens built on Ethereum can still be classified as securities by regulators, it all depends on how the symbol is sold and marketed as ICO’s.
Hinman also outlined what conditions can make a digital token a non-security. According to him:
“In a case where there is no central enterprise invested in or a situation where the digital currency is sold only to be used to pay for goods or services available via the network that it was created on.”
Hinman’s comments take Jay Clayton’s definition of what a security is one step further. Speaking to CNBC, Clayton, the SEC’s Chairman, said explicitly:
“Cryptocurrencies, which serve as replacements for sovereign securities are not a security.”
The definitions of both men (Hinman and Clayton) around ICOs are congruous and straightforward promoting a digital token that is not backed by any product, but a promise and widely selling it to investors even beyond those who would use the outcome will be deemed as securities.
Is it Possible for a Security Token to Evolve into a Non-security?
Although Hinman did not comment on particular altcoins, he left a mode for cryptocurrencies that start classified as securities to change into a decentralized asset, which is precisely the point the SEC says both Ether and Bitcoin have attained. This statement resounds bullish for Ripple. The network has been defending lawsuits against its XRP token while simultaneously in the process of decentralization.