Jay Clayton, Chairman of the U.S. Securities and Exchange Commission (SEC) has indirectly confirmed that ether (ETH) and other digital assets that functions like it are not securities, reports Coin Center on March 12, 2019.
As reported by BTCManager in June 2018, SEC Director of Corporate Finance, William Hinman who was present at a cryptocurrency summit in San Francisco, stated that the agency had thoroughly examined the workings of the world’s second largest cryptoasset, ether (ETH) and does not consider it a security token.
Interestingly, in a bid to clarify whether SEC chairman Jay Clayton and the entire agency share the same stance with Hinman, Coin Center reportedly worked with Rep. Ted Budd to send a letter to the SEC chair in September 2018.
As stated in the letter, the team asked the Commission to explain in clear terms the criteria used to determine whether the offer and sale of a digital token is an “investment contract,” and therefore a security under the Securities Acts and Howey Test.
In the letter, the team also tried to find out if it was possible for a token initially sold via an investment contract such as an initial coin offering (ICO) to still be categorized a non-security token and analyzed separately from its original purchase terms.
Coin Center asked:
“Do you agree that a cryptocurrency initially sold in an investment contract can, nonetheless, be a non-security as Mr. Hinman noted? Can the token be analyzed separately from the initial purchase agreement, which may be an investment contract? And, if so, could the resultant token, still be a non-security?”
Responding to the letter, the SEC Chairman made it clear that it is entirely possible for a digital asset to change from being a security token to a non-security asset if the digital asset is later offered and sold in a way that it will no longer meet the definition of a security.
Alluding to Hinman’s explanation, Clayton stated clearly that a cryptocurrency transaction might no longer be an investment contract if purchasers or contributors “would no longer reasonably rely on a person or group to carry out the vital managerial or entrepreneurial efforts.”
In essence, going by Clayton’s latest comments, it is safe to say that established cryptos like ether (ETH) and some others have officially joined king bitcoin (BTC) as non-securities.