By Karoliina Liimatainen on Friday 15 June 2018
Iqbal Gandham of eToro and CryptoUK praises SEC’s evaluation that decentralised cryptocurrencies are not securities. Most ICOs, however, are securities to the US regulator.
The US regulator Securities and Exchange Commission does not consider bitcoin or ether as securities. William Hinman, SEC's director of the division of corporate finance, gave a speech on Thursday where he said decentralised cryptocurrencies like bitcoin and ether should not be regulated as securities. This is a win for the cryptocurrency industry, which doesn't want to be regulated like stocks and bonds.
“The network on which Bitcoin functions is operational and appears to have been decentralized for some time, perhaps from inception. Applying the disclosure regime of the federal securities laws to the offer and resale of Bitcoin would seem to add little value”, he said in a speech at the Yahoo Finance All Markets Summit.
“As with bitcoin, applying the disclosure regime of the federal securities laws to current transactions in ether would seem to add little value,” he added.
Iqbal Gandham, the UK managing director of eToro and the chairman of the trade association CryptoUK, welcomed Hinman’s comments.
“This is the latest in a series of events which demonstrate how cryptos are pervading mainstream thinking. What is striking is the in-depth discussions that have clearly gone on behind the scenes, especially around the implications of ICOs,” Gandham said in a statement.
SEC's chairman Jay Clayton already indicated earlier this year that the regulator views bitcoin as "a pure medium of exchange", not a security. Most tokens, however, are a different story.
While Hinman showed a relaxed stance towards sufficiently decentralised cryptocurrencies, he said that ICOs (initial coin offerings) should usually be regulated as securities. He said that, while “the token – or coin or whatever the digital information packet is called – all by itself is not a security”, the circumstances surrounding the digital asset and the manner in which it is sold determine how it should be regulated.
According to Hinman, if buying a token gives the holder a financial interest in an enterprise, it constitutes an offering of a security.
“In these cases, calling the transaction an initial coin offering, or ‘ICO’, or a sale of a ‘token’, will not take it out of the purview of the U.S. securities laws.”
eToro and CryptoUK’s Gandham thought that Hinman’s comments were a step towards much-needed clarity for the crypto industry.
“We know that institutional investors are waiting for regulatory clarity to move from the sidelines to the centre of the playing field. Remarks like this suggest it might not be long to wait until we get there.”