Yahoo Finance’s All Market Summit Crypto, William Hinman, the Director of Corporate Finance for the SEC, said:
“When I look at Bitcoin today, I don’t see a central third party whose efforts are key factor to determining the success of that enterprise. The network on which bitcoin functions is operational and appears to have been decentralized for some time….
Moreover, putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network, its decentralized structure, we believe that current offers and sales of Ether are not securities transactions….”
His statements follow similar ones made in April by SEC chair Jay Clayton about bitcoin. Taken together, the two sets of remarks provide the clearest understanding of how the regulatory agency views the cryptocurrency market. In essence, when a cryptocurrency becomes sufficiently decentralized, as the widely popular bitcoin and ether have, the agency no longer views it as a security.
In contrast, smaller initial coin offerings, or ICOs, are almost always securities in the SEC’s eyes. That distinction matters, because securities are subject to the same regulations as normal stocks.
Bitcoin, which was not issued in an ICO, was already regarded as a commodity rather than a security, although the statement helps to clarify the situation.
But Ethereum is complicated because of the circumstances of its ICO. Although the token currently has utility, there was some concern that its speculative nature might have caused the SEC to consider it a security. And to muddy the waters further, there was no “single” third party promoter: Ethereum was a community effort, in a way that most contemporary ICOs are not.