Blockchain, Investment, Residential

SEC Officials Announce Cryptocurrencies Are Not Securities

Thursday, U.S. Securities and Exchange Commission (SEC) Director of Corporate Finance, William Hinman announced that the cyptocurrency Ethereum is not a security along with other cryptocurrencies.

The price of Ethereum spiked to about 9 percent, raising the price to $520, according to CoinDesk.

The SEC Decision

The SEC considers Ethereum as sufficiently decentralized. This allows it to escape a securities classification under U.S. law.

SEC executives seem to have changed their outlook on the cryptocurrency community.

For example, SEC leaders previously labeled Bitcoin as a commodity.

However, this is the first public statement by the financial organization on their view of ether.

“We don’t see a lot of value in seeing ether as a security,” said William Hinman, head of the Division of Corporate Finance for the SEC. “Ether is a coin that is evolving.”

Hinman stated that Ethereum’s decentralized and public network as well as its lack of a third party expecting to make a profit are the reasons the agency will not classify it as a security.

“In case of Ether as we interact with market participants, we keep gathering info and at some point we say this is something that we should make clearer,” said Hinman.

Hinman believes that depending on how digital assets are sold, delivered, and behave is more important than how they are named.

How will this affect blockchain oriented companies?

This will affect blockchain real estate companies such as Propy, Latoken, and Primalbase.

This year, Bitcoin and other top digital currencies have struggled to increase in value. The market was down about 35 percent since January.

However, the SEC announcement is a huge win for crypto. According to Coinmarketcap data, all but two of the top 100 cryptocurrencies by market capitalization are making gains.

Bitcoin (BTC) is currently up 5.89 percent in the 24-hour period, trading at $6,688 at the time of the announcement.

BTC trading volumes are on the rise at $5.1 bln, up from their weekly low of $3.8 bln.

The market value of Ethereum is currently at $50.39 bln according to CoinDesk. Ether is the “fuel” or “gas” to power the Ethereum network, a blockchain platform exploring the application of “smart contracts.”

The Enterprise Ethereum Alliance believes the Ethereum blockchain can build a variety applications. Microsoft and JP Morgan is part of this organization.

The SEC has yet to categorize other cryptocurrencies that are having an identity crisis with regulators.

For example, the cryptocurrency XRP has a lawsuit regarding its classification as a security.

The San Francisco-based company known as Ripple is developing a blockchain based network for faster global financial payments. XRP makes transactions possible on the blockchain network.

Ripple’s executives have stated that XRP is without a doubt not a security.

Moving Forward

Hinman stated the SEC will begin to examine cryptocurrencies on a case-by-case basis.

There is a risk of missing key facts and circumstances if the agency moves too quickly with labeling.

“We don’t think establishing a lot of bright lines is helpful,” Hinman said. “We don’t want to react too quickly, we do want to protect investors but not stifle innovation.”

Earlier this year, the cryptocurrency community was uncertain if Ethereum would be considered a “noncompliant” security. In 2014, the company failed to register its Initial Coin Offering (ICO) with the SEC.

However, the recent news from the SEC has cleared some of these previous concerns.

Crypto regulatory clarity has improved in Asia as well. Thailand’s SEC confirmed five domestic ICOs to raise funds as of May 14.

Despite some of the recent regulatory wins for crypto, there is still debate within the community that many currencies may remain classified as a security.

The debate stemmed from the fact that Ether was originally sold through a public offering.

Vitalik Buterin, founder of Ethereum, stated at the time “Ether is a product, NOT a security or investment offering.” Despite this, the SEC previously believed Ether should be classified as a security. Citing that many hold Ether with the intention of earning a profit.

Proponents of Ether continue to argue that the platform holds many other opportunities other than investing. This is the case for many crypto currencies.

Thankfully, the SEC has declared Bitcoin and Ether as not securities. They do not need to register with the agency.

Nicolas Pupo-Mayo specializes in the current and future application of blockchain technology to the international real estate market. His background is in homeland security, international political affairs, and communications.