Ethereum Doesn’t Qualify A Security, Says SEC Chairman Jay Clayton

Over the last few months, the U.S. SEC has been having a strict vigilance whether some cryptocurrencies qualify as securities. On Tuesday, March 12, the non-profit crypto research organization Coin Center published a report stating that the SEC Chairman Jay Clayton has confirmed that Ethereum (ETH) is not a security.

It means that the U.S. securities laws won’t be applicable to the world’s second-largest cryptocurrency. This news comes as a major relief to ETH investors as the matter gets more transparent and cleared.

Last year, William Hinman - the SEC Director of Corporation Finance said that Ethereum, as such, doesn't exhibit any traits of being a security. “If the network on which the token or coin is to function is sufficiently decentralized” then the digital currency is likely not a security, said Hinman.

Later in September, U.S. Congressman Ted Budd, working along with Coin Center, has co-signed a letter to Clayton asking whether he agrees to Hinman’s views. In a response letter last week on March 7, the SEC Chairman Jay Clayton stated that he agrees to it Hinman’s views regarding Ethereum.

Clayton wrote: “I agree with Director Hinman’s explanation of how a digital asset transaction may no longer represent an investment contract”. He further added: “If, for example, purchasers would no longer reasonably expect a person or group to carry out the essential managerial or entrepreneurial efforts. Under those circumstances, the digital asset may not represent an investment contract under the Howey framework”.

Furthermore, Clayton said that he agrees to it that one cannot adopt a static approach to know if the cryptocurrency is a security or not. He writes: “the analysis of whether a digital asset is offered or sold as a security is not static and does not strictly inhere to the instrument.”

SEC Chairman Jay Clayton has been having a tough stand on token issued through ICOs. Although he doesn’t have much of an issue with ICO’s fundraising method, his only concern is if the method needs to be properly regulated to protect the investors from any sort of misleading or fraudulent schemes. Clayton even said that ICOs are good ways of fundraising, provided they are regulated.