The Chairman of the United States Securities and Exchange Commission (SEC), Jay Clayton, is no stranger to anyone keeping tabs on cryptocurrency ETFs regulatory woes in the US. Now, however, Clayton has publicly noted that Ethereum, and cryptocurrencies like it, could potentially no longer be considered securities.
This does not mean the SEC has reclassified Ethereum
Although some cryptocurrency news outlets have been quick to erroneously stated that this means that Ethereum ”is not a security”, in reality, this would rather seem to mean that the asset class could potentially be reclassified in the future.
Nevertheless, this news comes from a recent Coin Center report, which cites a letter penned by Clayton. Explicitly, the letter is said to state that the SEC staff has determined that Ethereum classification could be subject to change.
This comes following some confusion on the matter. Last year, Coin Center reportedly worked together with the US representative Ted Budd, in an effort to reach out to Clayton regarding its official classification.
Moreover, Coin Center and Budd drafted and sent Clayton a letter, inquiring whether he agreed with the view held by the SEC’s Director of Corporate Finance, William Hinman, regarding Ethereum.
This came as Hinman had publicly stated that Ethereum ”in its present state” should not be regulated as a security. However, Hinman ceded that it should have been considered a security during the distribution process of Ethereum’s ICO.
Clayton has responded that he agrees with Hinman’s statements
On March 7th of this year, Budd received a reply from Clayton. In it, Clayton wrote that the definition of a digital asset such as Ethereum as being a security ”is not static” and can be subject to change as time goes on.
In broad strokes, Clayton’s letter affirmed that he largely agreed with Hinman’s statements:
”A digital asset may be offered and sold initially as a security because it meets the definition of an investment contract, but that designation may change over time if the digital asset later is offered and sold in such a way that it will no longer meet that definition.”
Although Clayton did not explicitly mention Ethereum in his reply, the letter makes it abundantly clear that Clayton is responding to ”Director Hinman’s June 2018 speech”.
Moreover, Clayton indicates that a formal change in classification, e.g., hinges on how Ethereum is managed:
”I agree with Director Hinman’s explanation of how a digital asset transaction may no longer represent an investment contract [a security] if, for example, purchasers would no longer reasonably expect a person or group to carry out the essential managerial or entrepreneurial efforts.”
As such, this should not be confused with a reclassification of Ethereum. However, it is a promising first step towards that end.
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Rasmus Pihl is a writer for Toshi Times by day and an avid follower of the cryptocurrency industry by night. Rasmus holds a Bachelor’s Degree in Marketing from the Gothenburg School of Business, Economics, and Law and runs a Swedish marketing consulting firm. Moreover, when he isn’t writing for Toshi Times, traveling, working or changing the world in some other capacity, Rasmus is more than likely caught up in postgraduate studies.