The chairman at the United States Securities and Exchanges Commission, Jay Clayton remarked that Ethereum (ETH) and similar cryptocurrencies do not qualify as a security under U.S. law. The non-profit crypto research organization, Coin Center published the news citing a letter written by Clayton on Tuesday, March 12. In 2018, the Director of Corporation Finance at SEC, William Hinman stated that Ethereum (world’s second-largest cryptocurrency by market cap) did not exhibit the properties of security.
Coin Center worked with U.S. Congressman Ted Budd in September last year in order to send a co-signed letter to Clayton, if he agrees with the approach stated by Hinman. The regulator has responded by stating that Clayton agrees “that the analysis of whether a digital asset is offered or sold as a security is not static and does not strictly in here to the instrument.”
He further added that the digital assets that begin as a security might see its designation over a time gap if the digital asset later is offered and sold in such a way that it will no longer meet that definition.” Virtual currency may be sold as a security when it is first launched if meets the definition of an investment contract while on the other hand, the digital asset may later be offered or sold to consumers without being investments. Clayton stated that agrees “with certain statements concerning digital tokens in Director Hinman’s June 2018 speech.” The letter dated March 7, written by him states:
“I agree with Director Hinman’s explanation of how a digital asset transaction may no longer represent an investment contract if, for example, purchasers would no longer reasonably expect a person or group to carry out the essential managerial or entrepreneurial efforts. Under those circumstances, the digital asset may not represent an investment contract under the Howey framework.”
Clayton also underlined in late 2018, that the ICOs “can be effective” but that “securities laws must be followed.” Clayton’s letter echoed his previous comments. Wherein he advised the group of investors might be promised “a suite of tickets” in return for funding the play that will qualify these tickets as securities.
He stated that “No one is creating it for their own … control of bitcoin, it’s designed to be a payment system replacement for sovereign currencies. We’ve determined that that doesn’t have the attributes of a security … as far as I’m concerned, that’s designed to be akin to the dollar, the yen, the euro … and it operates that way. People who purchase it are expecting it to operate that way.”