Although most of the crypto community has long believe that Ether ($ETH), the native token of Ethereum, is not a security — as far as the U.S. Securties and Exchange Commission (SEC) is concerned — it wasn’t until this week that we got some evidence that this view may indeed be correct.
William Hinman’s June 2018 Speech
On Thursday, 14 June 2018, William Hinman, the director of the Division of Corporation Finance at the SEC, made a speech at Yahoo Finance’s “All Markets Summit: Crypto” one-day event in San Francisco, California. The speech was about how the SEC plans to use the “Howey Test” to determine whether a digital asset should be considered a security or not. The only two cryptocurrencies Hinman mentioned by name were Bitcoin (BTC) and Ether (ETH), neither of which he said should be considered as securities:
“And so, when I look at Bitcoin today, I do not see a central third party whose efforts are a key determining factor in the enterprise. The network on which Bitcoin functions is operational and appears to have been decentralized for some time, perhaps from inception. Applying the disclosure regime of the federal securities laws to the offer and resale of Bitcoin would seem to add little value.
“And putting aside the fundraising that accompanied the creation of Ether, 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. 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’s remarks brought great relief to the crypto space, which had been uncertain about the status of Ether ever since 22 April 2018, when a New York Times interview with a former chairman of the U.S. Commodity Futures Trading Commission (CFTC), Gary Gensler, revealed that he was planning to say during a speech at MIT on 23 April 2018 that Ether and XRP had been issued and traded in violation of U.S. federal securities law:
“There is a strong case for both of them — but particularly Ripple [XRP] — that they are noncompliant securities.”
Lummis, Gillibrand Introduce Legislation for Regulating Cryptoassets
According to a press release issued on Tuesday (June 7), “U.S. Senators Kirsten Gillibrand (D-NY), member of the Senate Agriculture Committee, and Cynthia Lummis (R-WY), member of the Senate Banking Committee, introduced the Responsible Financial Innovation Act, landmark bipartisan legislation that will create a complete regulatory framework for digital assets that encourages responsible financial innovation, flexibility, transparency and robust consumer protections while integrating digital assets into existing law.”
According to a report by Cointelegraph published earlier today (June 9), Senator Gillibrand said during a Washington Post event on Wednesday (June 8):