This week, Chairman Jay Clayton supported an analysis from another employee of the SEC that Ethereum and related tokens may not be considered securities. However, the panelists at the same TOKEN2049 event are concerned over a specific criterion brought to like by the SEC.
Last year, SEC director of corporate finance William Hinman made comments that the token was “sufficiently decentralized.” Hinman had brought up this concept of being “sufficiently decentralized” in a speech in 2018 as a way to determine if a crypto asset was a security. He added that, if the network is “sufficiently decentralized” that the token or coin would work on, then it is possible that the assets “may not represent an investment contract.”
At last week’s event, Gabor Gurbacs of VanEck stated that it does not make sense that something can be considered a security if it is “sufficiently decentralized.” His comments came after the panel was questioned both how and if regulators have the authority to determine this kind of threshold.
VanEck has continually been working with regulators in the US to launch the Bitcoin exchange-traded fund (ETF). When the government shutdown happened at the beginning of the year, the platform had pulled their application due to a potential lack of time for approval and other adjustments that need to be made.
Gurbacs pointed out that even the traditional financial market’s activity and products could be considered decentralized, using the exchange-traded fund system and other capital market functions as examples. Still, he added that all of these components are covered under the security law. Still, Clayton agrees that Ethereum is not a cryptocurrency, according to a letter to Congressmen Ted Budd and the Coin Center advocacy group.
At the panel, founding partner Sandra Wu of Origin X Capital added her stance, saying that the comments from Hinman explained the approach to projects with a centralized organization and token issuance. However, it does not properly address the concerned for companies that have become more decentralized since they were established, like Ethereum.
She commented that there is a lack of guidelines from the SEC for the items that do not fit into their narrowed guidelines.
Gurbacs took the time to bring up the fact again that there is no formal ruling that would say that Ethereum is not a security, and he does not have faith that any real announcement will come soon.
With that in mind, the lack of formal announcement is likely the reason why VanEck is working to push through a Bitcoin ETF, which the commission then has to consider a commodity. Gurbacs warned that there has been no confirmation from the SEC chairman that Ethereum is not a security, and that the only statement from Hinman has been that it is not a security “right now.”