SEC Announces That Ethereum is Not Classified as a Security

sec ethereum security

There’s been much debate on how the United States Securities and Exchange Commission views various crypto assets. Thus far, their responses have been a mixed bag. On one hand, they’ve been clear that Bitcoin is not a security and that ICOs indeed are viewed as securities due to how initial coin offerings are used to fund startups. However, when it comes to other leading “digital tokens” such as XRP and Ethereum, they’ve been tight-lipped and non-committal.

Now, one of the biggest questions hanging over the cryptocurrency industry has been answered: Is Ethereum a security in the eyes of the SEC? 

The answer is a resounding no.

Today during Yahoo Finance’s All Market Summit: Crypto in San Francisco, SEC Director of Corporate Finance William Hinman said that Bitcoin and Ethereum would not be classified as securities, as defined by the SEC.

Hinman’s statements echoes that of SEC Chairman Jay Clayton’s recent comments about bitcoin, however, this is the first time Ethereum has been explicitly mentioned by the SEC to not be considered a security.

The SEC Director says that while Bitcoin and Ethereum may have once been offered as securities, they behave and should be treated more like commodities similar to gold, corn, livestock, or oil.

Hinman elaborated:

“...putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions."

Hinman explained that if a cryptocurrency network is properly decentralized with no managing entity, then the coin is not a security. Hinman was quick to add that just because an investment is labeled a “coin” or “token” doesn’t exclude it from being a security.

Despite the SEC’s stance on Bitcoin and Ethereum, the SEC still aims to crack down on unregistered ICOs, and have continued to warn investors about the potential pitfalls of investing in a fraudulent ICO.