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SEC Says Ether Is Not a Security, but Most ICOs Are

June 16, 2018 at 11:04 by Matt Jackson

The world’s largest and second largest cryptocurrencies, Bitcoin (BTC) and Ether (ETH), are not securities, because of how decentralized they have become, according to SEC Director of Corporate Finance, William Hinman. Hinman was speaking at the Yahoo! All Markets Summit: Crypto, on Thursday, and addressed the question of whether cryptocurrencies are securities or commodities.

A common definition of a security is that there is a centralized entity that directly benefits from the sale a security. In the case of Bitcoin, this entity has never existed, and Hinman clarified that the Ethereum network had become so decentralized that it was not, in its current guise, considered a security. Therefore, neither Bitcoin nor Ether, would be subject to SEC regulations on securities.

Hinman also said that many ICOs, although not necessarily all coin offerings, are securities. There is a single company or entity that stands to benefit from the sale of the token, and many claim that buying their coin will give the buyer a profit on their investment.

Hinman did not directly address any other alt coins, even though a lot of investors, in particular institutional investors, are waiting for clarification on this point. Ripple (XRP) is in the midst of a lawsuit alleging that it is a security.

On the news of Bitcoin’s and Ether’s status as non-securities, the market reacted. Both cryptocurrencies have seen their prices drop sharply since their all-time highs at the end of last year.

Bitcoin cost approximately $6,800 at the beginning of the week and had dropped to $6,135 on Wednesday. It saw decent gains on the SEC reports, rising back up to $6,640 on Thursday but has now retreated back to $6,475.

Ether saw wilder swings, starting the week at $525 before falling to $450 on Wednesday and rising back to $530 on Thursday. Ether is now trading at just under $500.

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