In a speech, the Director of the Division of Corporation Finance at the Securities and Exchange Commission, William Hinman, said that Ethereum’s Ether tokens (ETH) could not be classified as a security. He emphasized that the token could have been a security when it was initially offered to the users, but now it is water under the bridge. He also thrilled his audience by noting that SEC believes that start-ups could raise more money with cryptos than through traditional methods.

When Can Tokens Be Called Securities?

Hinman clarified that Ethereum and Bitcoin could not be called securities, which was met with loud cheers from the cryptocurrency community online. By saying this, he has removed the requirements for these currencies to be registered with SEC and be regulated by the federal agency. He said:

“[T]he 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.”

He also noted that when start-ups are in their initial stages and selling tokens for raising funds, their initial coin offerings (ICOs) could be defined as “securities.” Once the project launches, all the tokens will be called non-security “utility tokens.” As networks start running, the holders of the coin have no financial interest in the company, because of which, the coins will merely be used for transactional purposes.

The rules could be different for tokens that are generated solely to buy and sell goods and services on a network or in cases where a centralized company doesn’t exist. Platforms that are not 100% decentralized and those that work to fulfill the vested interest of their parent companies could be asked to furnish financial reports, let their coins be traded and follow all rules related to corporate fund-raising.

Have Banks Become Tech Companies?

Software data digital programs system technology concept. Source:
Software data digital programs system technology concept. Source:

Hinman also pointed out that banks are developing software and even selling them or using these platforms to advertise their products. This is making the entities operate more like tech companies with ad-supported revenue models. Users are getting increasingly upset that their data with banks, even if it remains anonymous in aggregated data sets, could reveal significant information about them.

He stated:

“It is also a sensitive topic at a time when banks are exploring new data products. Some bankers said that hedge funds have asked if they can see a stream of aggregated research data, such as what notes are the most read, or longest read, but also that their banks weren’t selling that information, people familiar with those requests said.”

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