The SEC’s go to person on cryptocurrency and initial coin offerings lashed out a rather perplexed statement on Bitcoin and Ethereum. The statement has apparently been woven around the duality in nature of ICOs, where he says that some ICOs do not work as securities while there are several others that do qualify to be counted as securities, and will feature under the regulatory control of the SEC. He has, however, excluded Bitcoin and Ethereum saying that these cannot be considered to be securities.
According to a speech delivered by William Hinman, head of the Division of Corporation Finance(SEC), at the Yahoo All Markets Summit: Crypto conference(San Francisco), ”Central to determining whether a security is being sold is how it is being sold and the reasonable expectations of purchasers.”
As per Hinman, the main problem while measuring if cryptocurrencies and ICOs were securities was expectations of return by third parties. Hence, it became a requisite to determine if the creation and sale of the asset was sponsored by a single individual or a group that is very instrumental and plays a crucial role in its development & maintenance. The thing to watch out for while purchasing these assets is to note whether they seek a return on the investment.
Clearing the confusion between securities and non-securities, Hinman further said that if the ICO has a centralized third party, alongside purchasers with an expectation of a return, then it the ICO is likely to be a security. He also gave examples of cryptoassets not being considered as securities and would not feature under the jurisdiction of the SEC.
Regarding his views on Bitcoin, Hinman specified that it is not a security on account of being decentralized since there is no central party whose efforts are a key determining factor in the enterprise. Additionally, the feels that Ether is also not a security as its network is also decentralized.