[Breaking] SEC Chairman John Clayton: Ethereum and Crypto Tokens Like it ‘Are Not Securities’
Because Cryptocurrency is still relatively new and hasn’t quite gotten as many frameworks set up for it as fiat currency, its legal status is constantly being brought into question.
One of the questions that is often asked is whether or not cryptocurrencies are Securities. This was the Basis upon which sued the Securities and Exchange Commission after they accused the firm of selling unregistered Securities in from of their kik token.
Now, it seems that the crypto community has some form of official word on the legality of Cryptocurrency. This comes courtesy of SEC Chairman Clayton, who stated that after staff analysis was conducted, it was discovered that cryptocurrencies are indeed not Securities.
This remark was sparked after Securities and Exchange Commission’s Director of Corporate Finance William Hinman stated in a speech that Cryptocurrency was not considered a security by the organization.
“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,” he said at the time.
Following this, the team at CoinCenter sent a letter along with Rep. Ted Budd to Chairman Clayton to find out if he agrees with Hinman’s stance on Cryptocurrency.
He then responded saying,
“I agree that the analysis of whether a digital asset is offered or sold as a security is not static and does not strictly inhere to the instrument.”
He also explained that digital asset may be offered and sold initially as a security due to its meeting the definition of a static contract but that this 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.
He did not, however, completely dismiss Hinman’s stance, and said that in some instances, he would be right.
“I agree with Director Hinman's explanation of how a digital asset transaction may no longer represent an investment contract if, for example, purchasers would no longer reasonably expect a person or group to carry out the essential managerial or entrepreneurial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,” the letter concluded.
A United Front
While crypto legality is still murky to an extent, it is helpful to have some clarification on its legal status from a top SEC official. However, a letter response is not enough as concrete regulation needs to be signed and passed for the benefit of the industry.