In a statement released to Bloomberg on June 15, Chris Concannon referenced a speech by William Hinman, director of the agency’s corporate finance division. In the speech, Hinman said that Ethereum, as “currently structured” would not qualify as securities transactions, despite the initial offering conditions of Ethereum back in 2014.
As Concannon told Bloomberg:
“We are pleased with the SEC’s decision to provide clarity with respect to current Ether transactions. This announcement clears a key stumbling block for Ether futures, the case for which we’ve been considering since we launched the first Bitcoin futures in December 2017.”
Ether Price Surges 10% Following SEC’s Clarification
Hinman’s comments were a huge relief to the crypto community, particularly following SEC Chairman Jay Clayton’s recent statements that Bitcoin was not a security. As the second most popular and valuable cryptocurrency, an SEC ruling that placed Ethereum as a security could possibly see mass delisting of ETH from the major exchanges. This was because Ethereum’s initial offering followed a standard ICO model and the SEC has been quite adamant that many ICOs could be securities offerings and that the agency would not be changing securities to law to adapt to cryptocurrencies.
As a result, the price of Eth saw an immediate 10% spike following the SEC’s clarification. While the price has somewhat retraced in the few days after, Eth’s price still remains substantially above the levels seen prior to the clarification.
The Possible Effects of Ethereum Futures on ETH Price
So far, the market has responded positively to the SEC’s clarifying statements on Ethereum and the possibility of the launch of Ethereum futures. However, it is worth considering the effect that a futures market would have on ETH price. As we reported in May, researchers at the San Francisco Federal Reserve claimed that the launch of the Bitcoin futures market was a major factor in its post-peak price decline.
While it is true that the entire cryptocurrency market fell after December 2017, the price of Bitcoin fell disproportionately more. Based on data from Coinmarketcap, the total market capitalization of Bitcoin fell by 51% from Dec 17 to Jan 17. In contrast, the entire cryptocurrency market capitalization only fell by 29% over the same period. Hence, it is plausible that an Ethereum futures market could have a similar negative effect on its price.
SEC Statement a Welcome Clarification, But Hardly a Solid Regulation
It is worth noting that despite the positive buzz generated by Hinman’s speech on the present state of Ethereum, there has been no change to the SEC’s actual regulations. As mentioned above, the agency has said that it has no intention of modifying the current securities regulations to accommodate the rise of cryptocurrencies. As such, it is still possible that the SEC may still go after Ethereum at some point in the future due to the ICO conditions of its launch.
This is not to say that the SEC’s comments on Bitcoin and Ethereum should not be viewed in a positive light. However, it should be placed in the appropriate context. While these statements might be a good indication of future regulation, so far there have been no actual changes to the regulations themselves.