SEC Does not Consider Bitcoin a Security; What Does it Mean?
Cryptocurrency investors and enthusiasts are celebrating after one major quandary that has been facing the industry was put out of the way. On Thursday the SEC announced that it does not consider both bitcoin and ether as securities.
This means that the two leading cryptocurrencies are now sufficiently decentralised and outside the control of one single entity.
The same cannot be definitively said of other cryptocurrencies like XRP seen by some as being controlled by the issuing company Ripple.
The announcement does not also offer reprieve to ICOs which basically power start up blockchain projects. The SEC, therefore, sees them as investment vehicles through which start ups raise capital. Securities are regulated like stocks which can have profound implications on the ICO scene.
Nevertheless, the statement about bitcoin and ethereum provides the clearest sign yet about how the SEC views cryptocurrencies. It means that when a digital currency becomes significantly decentralised and outside the control of any one entity, it will no longer be considered a security.
“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,” William Hinman, SEC’s director of the division of corporate finance said during Yahoo’s All Market Summit Crypto.
“And, as with bitcoin, applying the disclosure regime of the federal securities laws to current transactions in ether would seem to add little value,” Hinman added.
Only Current Offers and Sales
However, it is important to note that the official is careful with his statement. The treatment applies to “current offers and sales.” This means that early investors who got in before bitcoin and ether were sufficiently decentralised may not be off the hook yet.
Ethereum cofounder Joe Lubin says utility tokens “will continue evolving the web towards networks that are more fair, secure, and evenly distributed, in comments he made after the announcement was made.
He says ConsenSys, an Ethereum based technology company will continue to engage regulators globally to drive growth of the technology.
ConsenSys develops decentralised applications on top of the Ethereum blockchain. Several ICOs have been launched on top of the Ethereum platform with investors contributing using Ethereum.
The news provided a much needed boost to the cryptocurrency market experiencing sharp falls since last weekend. Bitcoin is now up 1.5% to trade at $6500 on Bitfinex from lows of $6289 on Thursday. It briefly touched $6700 on Thursday before losing momentum.
Ethereum is up 2.7% in the last 24 hours. It is now trading at $490 a unit. The rest of the market is doing relatively well. Total market capitalisation now stands at nearly $280 billion.
The SEC recently charged individuals behind the Centra Tech ICO for selling an unregistered security. The firm raised $32 million in 2017 and the ICO was once promoted on Twitter by boxer Floyd Mayweather.