Jay Clayton, Chairman of the U.S Securities and Exchange has confirmed in a letter that Ethereum (ETH) and Cryptos like it are not securities.
In a letter to Rep Ted Budd, Mr. Clayton agreed with Bill Hinman’s approach to classifying Ethereum and similar Cryptos as a non-security. 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.”
Bill Hinman, the Director of Corporate Finance had made a statement last year that Ethereum is not likely a security as it is sufficiently “decentralized”. According to his framework if a project is no longer centrally controlled by a single entity then it is no longer a security, even though it may have started off as security under the Howey Test.
Mr. Clayton voiced his opinion in a letter responding to Rep Ted Budd, he wrote:
“I agree with Director Hinman’s explanation of how a digital asset transaction may no longer represent an investment contract if, for example, purchasers would no longer reasonably expect a person or group to carry out the essential managerial or entrepreneurial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.”
Note that the Chairman has not mentioned Ethereum anywhere nor has the SEC made any official announcements regarding Ethereum specifically. Ethereum held its token sale back in 2014 raising $18.4 Million in Bitcoins (BTC) at the time, the team managed to sell 60 Million tokens at the time.
One may reasonably imply from his statements that Ethereum is not a security in its current state, but it is still unclear how other Cryptocurrencies and smart contract platforms would be classified under this framework as the specific metrics to measure decentralization is not mentioned.
Image Source (Modified): Flickr
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