The director of the Securities and Exchange Commission (SEC) division of corporate finance, William Hinman, has announced that Bitcoin and Ethereum will not be regulated securities and are, therefore, not under the jurisdiction of the SEC.
This follows an announcement from SEC chief Jay Clayton earlier in June 2018 that Bitcoin was not a security, making Bitcoin and Ethereum the only cryptocurrencies that have gotten the all-clear from the SEC.
Hinman said in his address at today’s Yahoo Finance All Markets Summit that cryptocurrencies like Bitcoin and Ethereum that have become decentralized to the point that no one has control of them will not be considered securities. He added that he was open to adding more cryptocurrencies to the non-securities category after careful analysis.
This is welcome news since it puts most of the money in the cryptocurrency world outside of the SEC’s jurisdiction. Bitcoin and Ethereum have a market cap of USD 113 billion and USD 51 billion respectively as of this writing, 57% of the total cryptocurrency market cap.
Since Bitcoin and Ethereum are outside of SEC jurisdiction, cryptocurrency exchanges will not have to seek SEC approval or licensing to facilitate trading of the top two cryptocurrencies. This will keep the Bitcoin and Ethereum markets more decentralized and increase overall liquidity.
However, the SEC is adamant that it will be regulating most initial coin offerings (ICOs) as securities. Therefore, ICOs must go to the SEC to obtain proper licensing before taking investments or face severe legal consequences.
It further clarifies that what defines a cryptocurrency as a security is if a third party that developed or sponsored the cryptocurrency is making a profit off selling it and if investors expect a return on their investment. Not all ICOs will be considered securities since some offer digital assets that can be considered consumer products, where users don’t expect a return on their investment.
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