After months of uncertainty, it appears that there is now some clarity regarding the status of Ethereum as a security or not. The U.S. Securities and Exchange Commission has now decided that Ethereum is not a security according to federal guidelines.
The news broke on Thursday afternoon during the Yahoo Finance All Markets Summit on Crypto. William Hinman, director of the SEC’s division of corporate finance said that the way Ethereum is currently structured does not qualify it to be rated as a security by the SEC.
“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,” stated Hinman.
The news immediately had a positive effect on the cryptocurrency markets with Ethereum trading at well over the $530 mark just after the news broke. That equates to a substantial 11% increase. Ether had previously been languishing considerably during the past day’s slump having even dropped to $475 at one point. Other cryptocurrencies also surged on the news with the largest increases seen by Cardano, Tron, and EOS which also saw double-digit jumps of around 10-12%.
Hinman noted that despite the way Ethereum was initially issued, through an ICO-style crowd sale, the network had become sufficiently decentralized that it no longer had a controlling party, adding that assets originally sold as securities have the potential to lose that designation down the road. This statement clears the way for other currencies not to be considered as securities either, which would be a major boost for the continued decentralization of the crypto space.
There had been signs that the Securities and Exchange Commission would be leaning towards not considering cryptocurrencies as securities. Previously, SEC Chairman Jay Clayton had said that cryptocurrencies like bitcoin are not securities, though the agency only definitively named Bitcoin and Ether would be deemed currencies and not securities.