The Chairman of the U.S. Securities and Exchange Commission (SEC), Jay Clayton, confirmed that Ethereum (ETH) is not considered a security. Although Ethereum has been sold through an illegal securities offering, the analysis made by the regulatory agency confirmed that this and other similar decentralized cryptocurrencies are not considered securities.
Jay Clayton Confirms ETH is not a Security
There are different virtual currencies in the market that have been analysed by regulatory agencies around the world. There are several tokens in the space that have been labelled as securities. This time, the Chairman of the SEC, confirmed that Ethereum is not a security.
Clayton sent a letter to the US House Rep. Ted Budd that previously requested the SEC to provide clarity regarding the comments made by Jay Clayton about Ethereum not being considered a security.
Clayton commented about it:
“Your letter also asks whether I agree with certain statements concerning digital tokens in Director Hinman’s June 2018 speech. I agree that the analysis of whether a digital asset is offered or sold as a security is not static and does not strictly inhere to the instrument. A digital asset may be offered and sold initially as a security because it meets the definition of an investment contract, but that designation may change over time.”
He then went on saying that he agrees with Directo Hinman’s explanation related to how a virtual currency may no longer represent an investment contract. In this case, he explained that if purchasers do not expect a person or a group to carry out essential managerial or entrepreneurial efforts. If that happens, this asset may not be considered an investment contract under the Howey framework.
Back in 2018, Hinman explained that a cryptocurrency such as Ethereum could have been distributed through an Initial Coin Offering (ICO) – which are considered securities in most of the cases. Nevertheless, as time passed, Ethereum became sufficiently decentralized for it to avoid being considered a security under the Howey test.
Ethereum is the second largest digital asset in the market after Bitcoin (BTC). It has a market capitalization of $14.15 billion and each ETH can be purchased for $134. Bitcoin has also been considered a commodity by the U.S. Commodity Futures Trading Commission (CFTC). In this way, Bitcoin has been placed in the same category as gold.