Ethereum holders have been concerned for sometime regarding the status of the popular cryptocurrency and if the Securities and Exchange Commission (SEC) was going to classify it a security. Well, it isn’t, and the same goes for Bitcoin for that matter! The SEC has ruled Ethereum is not a security based on current US guidelines.
After weeks of worry and frustration on whether the SEC was going to label Bitcoin or Ethereum a security, great news came by way of the Yahoo Finance All Markets Summit on Cryptocurrency.
The director of the SEC’s division of corporate finance, William Hinman, said that Ethereum’s current structure does not qualify it as a security. However, now all ICO’s fit into that same category and might be subject to the definition of a security.
Hinman said in part.
“And 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. And, as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value.”
Essentially how the SEC defines a cryptocurrency or ICO as a security is pretty straightforward. If it's decentralized and no third party involved, it’s generally not a security. If a centralized third party exists along with buyers with a promise of a return, then it's a security.
Ethereum was saved from the definition as a security because even though there was an ICO style sale when it was created, the Ethereum network had become decentralized and there is no real controlling party.
After the June 14th SEC statement, Ethereum and many other major cryptocurrencies saw some welcomed gains in value. Previously Ethereum was down well below the 500 US dollar mark in value.