The Security and Exchange Commission’s (SEC) Director of Corporate Finance, William Hinman, announced at Yahoo Finance’s All Market Summit: Crypto today that bitcoin, ether, and other decentralized cryptocurrencies will not be classified as securities.
A New Asset Class
The U.S. Securities and Exchange Commission (SEC) has taken its sweet time in determining how to classify cryptocurrencies.
Finally, during a speech in San Francisco, California, SEC Director of Corporate Finance William Hinmann openly discussed the SEC’s views on initial coin offerings (ICOs) and digital assets — with the overall takeaway being that it’s not the name that matters, but rather the way a cryptocurrency is distributed, marketed, and used.
Hinmann first discussed how different coins were being looked at by the SEC — the most important factor being the circumstances surrounding the coin and the way it was distributed. He explained:
Calling the transaction an initial coin offering, or “ICO,” or a sale of a “token,” will not take it out of the purview of the U.S. securities laws.
The SEC’s stance may throw a wrench into many companies’ plans, particularly those looking to launch an ICO in the future. Said startups and companies will have to take steps to ensure that they comply with whatever rules and regulations the regulatory authority lays out.
However, Hinmann also talked about assets that were originally offered as a security which may later be offered as a non-security. He explained:
But what about cases where there is no longer any central enterprise being invested in or where the digital asset is sold only to be used to purchase a good or service available through the network on which it was created? I believe in these cases the answer is a qualified “yes.”
By “yes,” Hinmann means such digital assets may be considered non-securities.
Many blockchain start-ups that have raised money through ICOs aim to build decentralized projects in which the tokens have some form of utility. Eventually, the hope is that the network will be able to