SEC Doesn’t Regard Bitcoin and Ether as Securities
The Securities and Exchange Commission of US has disregarded ethereum as a platform for investment. Director of the division of corporate finance, William Hinman, said on Thursday that ethereum’s token, ether, cannot be supervised in the same way as stocks and bonds.
Earlier in April, Jay Clayton, SEC Chair, acknowledged bitcoin with the same sentiments. Both the statements can be considered to understand the outlook of America’s premier regulatory authority over digital currencies.
The recent remarks suggest that a digital coin can no longer be regarded as a security after it becomes significantly decentralized. On the contrary, most of the smaller tokens and Initial Coin Offerings are included into the bracket of investment vehicles. The distinction is important as securities have to be regulated like normal stocks.
Hinman said, “Based on my understanding of the present state of ether, the Ethereum network, and its decentralized structure, current offers and sales of ether are not securities transactions. And, as with bitcoin, applying the disclosure regime of the federal securities laws to current transactions in ether would seem to add little value.”
On the other hand, co-founder of Ethereum and founder of CosenSys, Joe Lubin was thankful for SEC’s decision. He was particularly pleased by the clarity provided by the authority. The co-founder affirmed that his digital coin would continue to transform the web through networks that are secure, fair and uniformly distributed.
As of now, there are hundreds of developers that use ethereum network for developing applications. The director of research at Coin Center, Peter Van Valkenburgh, said that software development and the network has sufficiently, and there is no third party upon which it has to relay.
The differentiation matters for the industry, as investors are able to distinguish digital coins from a common stock of a company, in which a person is providing funds based on a company’s capability of developing products and earn a profit.
But, it should be noted that there is confusion in regards to the initial investments made in the network being securities, as back then, ethereum was not completely decentralized. Hinman did not have any comments on the topic which hints that original investors who made the most profits might face regulations someday.
Other virtual coins have not been quite lucky as SEC has made them a subject to regulation as they normally raise funds to boost a start-up and its application. One should know that trading ether is not regulated but buying and selling tokens build using the ethereum network will be facing government control. ‘
Back in February, the SEC proposed the Senate’s Committee of researching digital currencies with the help of Congress and other federal and state colleagues. It was aimed to diagnose crypto exchanges and trading websites for taming the wild crypto space.
After, clarification over ether’s individuality it is hoped that many more investors will jump over the network to avoid paying taxes to the government. Similarly, investors would like to trade bitcoin as it has the highest chances of profits with the lowest government control.