The Chairman of the Securities and Exchange Commission Jay Clayton has today confirmed that ethereum is not a security. The SEC chairman indicated this in a letter responding to U.S. congressman Ted Budd’s request for clarification.
If this sounds like old news, you can be forgiven for thinking so.
Last June, William Hinman, an SEC representative who deals with affairs relating to cryptocurrencies and initial coin offerings (ICOs) declared that Bitcoin and Ether, the two most valuable cryptocurrencies are not securities. The news was met with a warm reception by the cryptocurrency community.
Later in the year, however, Clayton all but rebuffed the comments made by Hinman when he explained that comments of an SEC staff did not amount to regulation on a matter. Referring to Hinman’s declaration, Clayton said:
“As we carry out our market oversight functions, I believe we at the Commission should keep this important distinction in mind. Several weeks ago, I instructed the directors of the Division of Enforcement and the Office of Compliance Inspections and Examinations to further emphasize this distinction to their staff”.
While the remarks did not do any damage to the hopes of crypto faithfuls, Clayton’s letter today reiterates the statement made by Hinman.
The content of SEC Chairman Clayton’s Letter
While Clayton did not specifically mention any cryptocurrency in his letter, he basically confirmed the stance which Hinamn took last year.
“Your letter also asks whether I agree with certain statements concerning digital tokens in Director Hinman’s June 2018 speech. I agree that the analysis of whether a digital asset is offered or sold as security is not static and does not strictly inhere to the instrument.” He wrote.
“A digital asset may be offered and sold initially as a security because it meets the definition of an investment contract, but that designation may change over time if the digital asset later is offered and sold in such a way that it will no longer meet that definition.”
He was sure to confirm Hinman’s analysis and hence his conclusion about bitcoin and ether.
“I agree with Director Hinman’s explanation of how a digital asset transaction may no longer represent an investment contract if, for example, purchasers would no longer reasonably expect a person or group to carry out the essential managerial or entrepreneurial efforts. Under those circumstances, the digital asset may not represent an investment contract under the Howey framework,” Clayton wrote.
SEC’s Efforts Towards Cryptocurrency
As Smartereum reported, the SEC has promised to develop a “plain English” guide that will differentiate ICOs which are security tokens and those which are not. The guide it said is expected to address other issues such as crypto custody, token evaluation, and accounting standards.
Also in a bid to better understand cryptocurrencies and Fintech, in general, the SEC is setting out on a tour to engage with fintech entrepreneurs and innovators across the country starting from San Francisco on March 26.
Just like U.S House Rep Ted Budd wrote to the SEC, lawmakers, who are members of the U.S. House of Representatives committee on Ways and Means also wrote to the IRS demanding updated and more comprehensive guidelines on how to calculate taxes from crypto investments.
Riccardo Lopp is a writer specializing in Crypto, ethereum and whole blockchain ecosystem. His background is in economics and statistics.