In an announcement at Yahoo Finance’s All Market Summit: Crypto in San Francisco on Thursday, the USA Securities and Exchange Commission (SEC) Director of Corporate Finance William Hinman said that the commission would not be classifying Ethereum (ETH) or Bitcoin (BTC) as securities.
The commission’s policy is in line with what SEC Chairman Jay Clayton said recently about Bitcoin: cryptocurrencies are not securities and the definition of “security” would not change to include Bitcoin. Hinman’s announcement shows the official position of the SEC: the name isn’t important, but the way in which it’s sold, promised, and behaves is the key deciding factor.
According to Hinman, the SEC will not be changing cryptocurrency and digital asset rules, but rather would be applying them. Previously, Bitcoin and Ethereum may have been offered as securities, which would have required registration with the SEC, but a consensus has emerged that they behave and are treated like commodities, similar to gold and oil.
Hinman said “form is disregarded for substance,” in the SEC’s thinking. He said that the economic realities are more important than how something is labeled.
Hinman added that if a cryptocurrency network is sufficiently decentralized and purchasers no longer have expectation of managerial stewardship from a third party, a coin is not a security.
Labeling an investment opportunity as a “coin” or a “token” does not make something not a security, he added.
Had the SEC defined Ethereum or Bitcoin as securities, cryptocurrency markets would have likely been sent into a selling frenzy, faced with uncertainty on how regulation would apply to exchanges, ownership, and markets.
Bitcoin (BTC) is up by 5,54% in a 24-hour period and is trading at $6 696,83, Ehtereum (ETH) is up by 9,56% and is trading at $517,74 at press time.
