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Cryptocurrency industry sources continue to debate the impact of fresh statements from US regulators over whether the Ethereum network’s ether (ETH) token is a security.
SEC Presents Concerted View On Ethereum
After receiving a response to an enquiry from Jay Clayton, chairman of the US Securities and Exchange Commission (SEC), New York-based nonprofit Coin Center reignited a festering debate about cryptocurrency and securities obligations. Coin Center had asked Clayton for clarification in September 2018, three months after the SEC’s Director of Corporate Finance, William Hinman, issued comments suggesting he did not think ether was a security.
Hilman based his stance on the Howey Test, a method for determining securities compliance, and confirmed private research suggested Ether would fail this test. Now, Clayton appeared to confirm Hinman’s original claims.
“I agree with Director Hinman’s explanation of how a digital asset transaction may no longer represent an investment contract if, for example, purchasers would no longer reasonably expect a person or group to carry out the essential managerial or entrepreneurial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,” Clayton wrote in the response to Coin Center March 7. “Under those circumstances, the digital asset may not represent an investment contract under the Howey framework.”
Is Ether A Security?
Reactions to Clayton varied, with experts arguing that, while the letter’s content was worth noting, it should not be used as a de facto settling of the crypto vs. securities matter.
“Did Clayton endorse the SAFT framework? (No),” industry lawyer Marco Santori summarized in social media comments. “Nor did he say that Ether is not a security. Words have meaning, though, and so does diction. It’s tough to ignore these letters and everything that goes into them.”
6/ Did Clayton endorse the SAFT framework? lolno. Nor did he say that Ether is not a security. Words have meaning, though, and so does diction. It's tough to ignore these letters and everything that goes into them. Best predictive value we have, for now.
— Marco Santori (@msantoriESQ) March 12, 2019
Santori added Clayton’s outlook was the “best predictive value we have” under current conditions.
Securities compliance continues to preoccupy US regulators at local as well as national level. Multiple actions have occurred over the past year, part of efforts to clamp down on unauthorized sales of tokens considered securities.
Coin Center lead Jerry Brito, meanwhile, thanked Clayton and Hilman for their “thoughtful approach” to the topic.
What do you think about Jay Clayton’s letter? Let us know in the comments below!