Great news for investors and traders of bitcoin and etherum: the two digital currencies have not been deemed by the U.S. Securities and Exchange Commission to be “securities.”
The issue was addressed in a speech at the Yahoo All Markets Summit Crypto conference in San Francisco. William Hinman (SEC’s head of the Division of Corporation Finance) has relayed that the two largest digital currencies are not being viewed as securities, which would bring them under the SEC’s scrutiny, and require registration with the agency.
Instead, the new asset class is being deemed a commodity. Now under the purview of the Commodities and Futures Trading Commission, bitcoin and ethereum trading in the U.S. is still subject to some overview; the commodities will have some market manipulation protections, and futures trading will be allowed to begin (or resume).
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“Central to determining whether a security is being sold is how it is being sold and the reasonable expectations of purchasers,”
The key determination in bitcoin and ether being labelled as commodities is that they are decentralized, and currency buyers are not putting their faith in a third party to determine the course of the enterprise. I stock purchases, on the other hand, there exists a distinct correlation between a buyer, a controlling party (the company) and the performance of that company on the purchased security.
“Central to determining whether a security is being sold is how it is being sold, and the reasonable expectations of purchasers,”
On other currencies and ICO’s Hinman offered more:
“There is excitement and a great deal of speculative interest around this new technology. Unfortunately, there also are cases of fraud.”
While it is great news that initially moved the market, these are only two currencies. Coinmarketcap currently lists 1600 currencies, and a full set of rules will have to be published before different currencies can be categorized.
Ripple (XRP) is currently under investigation, in a lawsuit claiming that the token is a security.
It’s highly likely that Litecoin and Bitcoin Cash will soon be receiving a similar nod from the SEC. Both are decentralized currencies, that operate in a similar manner to ethereum and bitcoin.