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Ethereum Not a Security, Confirms SEC

Securities and Exchange Commission (SEC) chairman Jay Clayton and representative Ted Budd in their latest analysis have confirmed that Ethereum and other similar cryptocurrencies do not fall under the category of security and thus they are not subject to any security laws. The report was confirmed by cryptocurrency and blockchain legislative advocacy group Coincenter, who also published a correspondence report on SEC meeting.

Last July, the SEC head of the Division of Corporate Finance, William Hinman said that Etheruem and significant other cryptocurrencies which have sufficient amount of decentralization on the platform that they operate on, cannot be considered as security.

A couple of months back, Coincenter approached the SEC chairman with a letter asking whether the agency agrees with the statements made by Hinman and the chairman Mr. Clayton replied in affirmative.

Here’s an excerpt from the letter sent by SEC,

“I agree with Director Hinman’s explanation of how a digital asset transaction may no longer represent an investment contract. If for example, purchasers would no longer reasonably expect a person or group to carry out the essential managerial or entrepreneurial efforts. Under those circumstances, the digital asset may not represent an investment contract under the Howey framework.”

Although the chairman did not explain further as in which other cryptocurrencies do not fall under the category of security.

This is not the first time when the chairman of SEC has voiced his opinion on the security aspect of cryptocurrencies. In June 2018, during an interview with CNBC, Clayton has said that if any crypto has enough decentralization on the platform it operates on, then it cannot be deemed under the security.

Clayton explained,

“Replace the dollar, the yen, the euro with bitcoin — That type of currency is not a security,” Clayton stated at the time. “Where I give you my money and you go off and make a venture […] and in return for me giving you my money, you say, ‘You know what, I’m going to give you a return. That is security, and we regulate that. We regulate the offering of that security, and we regulate the trading of that security.”

Clayton says ICOs are Fine As Long As They Follow the Security Laws

While most of the governments around the world are quite skeptical about the ICOs and how they are conducted, Clayton has a different approach. Clayton says that ICOs are the novel way of generating capitals for entrepreneurs and startups, but since these ICOs are offering security, they must abide by the Security laws.

SEC chairman’s definition for security surely ensures that Bitcoin and Ethereum do not fall under the security category, however, Clayton did not make it clear which other cryptocurrencies can be excluded from the security list.