SEC says that digital coins are not securities

The Securities Exchange Commission (SEC), the regulatory authority over capital markets in the USA,  has declared that Ethereum and its digital coin ether are not securities. The statement was made during the Yahoo Finance summit by William Hinman, director of the division of corporation finance at SEC.

“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”, said Hinman, cited by The Verge.

He also said that other cryptocurrencies might one day not need securities regulations. The idea behind this is that there will be sufficient decentralized networks and systems and there will be no need for regulating. So far, SEC has considered some digital coins as securities, particularly those distributed through an initial coin offering. One year ago, DAO tokens were found to be securities after an investigation, so all sales of DAO had to be registered with the SEC. A few months later, SEC chairman Jay Clayton said that every ICO I’ve seen is a security and many of them were illegal.

The point is that while ICO (initial coin offering) is a transaction used on the capital markets and it’s regulated by SEC or any counterparts from other countries, the coin itself it is not a security. It is a declaration that can decisively show that cryptocoins are currency, and therefore should be regulated by central banks.

The definition is important both for accounting (taxes paid according to the profit made) and for users, in order to have protection against fraud.

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