The SEC & CFTC were ‘supposed' to Convene and Decide Whether Cryptocurrencies are Securities..
The Wall Street Journal published a post on May 1, 2018 about the “World’s Second Most Valuable Cryptocurrency Under Regulatory Scrutiny” and at the bottom of that post said “A working group of regulators including senior SEC and CFTC officials are scheduled to discuss the matter on May 7, one of the people said.”
Well, either they were misinformed or it was just another ploy to spread #FakeNews or more appropriately in cryptoland, #FUD. However, it does not seem to be working as the collective whole of the Ether world seems to be ok and not selling with their feet to the flame.
Both the Securities and Exchange Commission and Commodities Futures Trading Commission were allegedly convening today to discuss the future position of cryptocurrencies. And whether they qualify as securities or not within the US.
Turns out, the reporter, Paul Vigna, had this comment on his WSJ article:
It's nothing that major. A "working group" meeting, not a public meeting. How'd we find out about it? The way we find out about everything. We, like, talk to people.
— Paul Vigna (@paulvigna) May 7, 2018
Values of coins in the cryptocurrency world have felt a brief surge in prices this week. With Ethereum reaching over £600/$800 over the weekend before shrinking by over 5%.
This bull to bearish reversal is the work of investor anxiety over the talks between the Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC).
The two commissions are putting the focus of their discussions this week on the status of Ethereum. According to the Wall Street Journal, this is in an attempt to understand whether ETH, and other cryptocurrencies in the future, should come under the same regulatory guidelines that securities do.
At the beginning of May, Ethereum's co-founder, Joseph Lubin, stated that there would be no concerns over the status of ETH. As it has never been identified, nor set up to be a security.
“We spent a tremendous amount of time with lawyers in the US and in other countries, and are extremely comfortable that it is not a security; it never was a security… many regulators that matter understand what Ethereum is.”
Lubin continues to illustrate the distinct ways in which ETH is set up as something other than a security. As a blockchain, it already has an in-built system for miners to validate their transactions, preventing any illicit activity.
One of the factors that must come into play for these proceedings, has to be the older method of assessment used in the US. This method refers to the 1946 securities test called the ‘Howey Test'.
It functions to determine whether the value of the transaction is due largely to the work of one side. But whether this proves completely reliable for an area as new as blockchain, cryptocurrencies and Initial Coin Offerings remains to be seen.
But this post would not be complete without a quick browser of the crypto-twitter universe:
I called the SEC for information on the upcoming Ethereum-Security issue. pic.twitter.com/mB8ZrNFd7U
— CryptoPanda (@pandahanda44) May 7, 2018
So, I called the SEC & they said they have no clue what the fuck everyone is talking about w Ethereum. Call them for yourselves and confirm. They’re open until 5 PM EST GMT-4
Another person at the SEC office called it a “hoax” pic.twitter.com/T5VPkLWIly
— t.me/CoinEducation (@CryptoMedicated) May 7, 2018
Whether or not Ethereum is classified as a security by a government agency is not what actually matters.
What matters is whether or not it matters that a government agency makes such a declaration.
— Jameson Lopp (@lopp) May 4, 2018
The SEC made us fear Ethereum because Bitcoin was so obviously just a currency and out of their realm. They want to crush crypto, so the only way to scare us is to frown at Ethereum. The legal field is clear: Fish will ride bicycles before Etheteum could be called a security.
— John McAfee (@officialmcafee) May 7, 2018
Regardless, the Howey Test offers some form of regulatory filter for the numerous fraudulent ICOs which damage their reputation as a means of obtaining investment capital.
Cryptocurrency performances over the week have fallen into the red amid concerns over the ruling. With steep declines ranging from 4% (Bitcoin), 8.78% (XRP), 9.1% (Ethereum) and 9.48% for Stellar.
To check the official website for all of the meetings (and livestreams), please visit https://www.sec.gov/news/upcoming-events#upcoming_events_public_hearings
Whether or not you are upset there is no May 7,2018 Ethereum Security SEC & CFTC meeting, it does have us reevaluating the relevance of the closed room discussions and even erroneous or misleading reporting.
To us, it seems that this meeting is more of an informative discussion that is way for them to establish a basis for deciding whether Ethereum is a security moving forward. As stated before, we do not believe they will pass meaningful judgement on Ethereum’s financial classification today. We will still be consistently monitoring the situation with the SEC and will update you if they release any new information.