The Securities and Exchange Commission’s head of the Division of Corporate Finance, William Hinman, stated during the Yahoo All Markets Summit today in San Francisco that cryptocurrencies like BTC and ETH are not securities. Soon after the SEC executive made the statements, cryptocurrency markets saw some gains as BTC rose $350 immediately after the news went public.
Also read: Yahoo! Japan Confirms Entrance Into the Crypto Space
SEC Executive: Decentralized Cryptocurrencies Are Not Securities
The SEC executive who is in charge of overseeing the cryptocurrency and initial coin offering (ICO) landscape, William Hinman, stated today that cryptocurrencies like bitcoin core (BTC) and ethereum (ETH) are not considered securities. Hinman stated that some ICOs may be considered securities but the decision is based off a factor of decentralization.
“Central to determining whether a security is being sold is how it is being sold and the reasonable expectations of purchasers,” Hinman explained at the Yahoo Summit. “This also points the way to when a digital asset transaction may no longer represent a security offering. If the network on which the token or coin is to function is sufficiently decentralized – where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts – the assets may not represent an investment contract.”
Moreover, when the efforts of the third party are no longer a key factor for determining the enterprise’s success, material information asymmetries recede. As a network becomes truly decentralized, the ability to identify an issuer or promoter to make the requisite disclosures becomes difficult, and less meaningful.
Immediately after the announcement, BTC/USD markets spiked well over $350 USD in an hour. Many other cryptocurrency markets like ETH have seen gains as well.
