The U.S. Securities and Exchange Commission (SEC) has declared that Ethereum (ETH) is not a security under U.S. securities law as it is a decentralized structure that is not controlled by any committed third party.
SEC Backs Decentralized Coins
Speaking at the Yahoo All Markets Summit: Crypto conference in San Francisco, the finance head said that the key issue is how the asset is sold and the ‘expectations of purchasers.’ At the time of publishing, Ethereum is trading at $518, according to CoinMarketCap, up by 9.59 percent in 24 hours.
William Hinman, head of the Division of Corporation Finance at the SEC, said that U.S. securities law will not apply to Ethereum as a tradable commodity because of its decentralization. This acknowledges that it was originally sold in an initial coin offering (ICO), but that it is not controlled by any committed third party who is giving investors an expectation of future value increase.
Hinman said: “If the network on which the token or coin is to function is sufficiently decentralized and the purchasers no longer have a reasonable expectation that a person or a group is going to carry out a central, managerial or entrepreneurial effort, those assets might not represent a securities contract.”
“Putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network is a decentralized structure. We believe that the current offers and sales of Ether are not security transactions.”
He highlighted other laws that do apply to companies that issue tokens, including know-your-customer (KYC) and anti-money laundering (AML) laws. He also said that investor contracts that involve Bitcoin could be classed as a security if they meet certain requirements or offer a future increase in value.
Paying attention to the simple agreement for future tokens (SAFT), he said that they are likely to ‘retain the characteristics of a security for some time.’ He conceded that some digital aspects may be able to be resold as a