Did the SEC Chairman Confirm Ethereum Isn't a Security? Not Quite, but It's Optimistic

Ethereum is most likely not a security under existing United States laws, as previously said by U.S. Securities and Exchange Commission Division of Corporate Finance head William Hinman.

While the statement of SEC Chairman Jay Clayton released on March 12 is certainly positive for the cryptocurrency sector, it did not directly confirm that Ethereum is not a security.

"Clayton didn't say that 'Ether is no longer a security.' He said he agreed with Hinman's explanation of when a token is no longer a security. Hinman can say stuff like that but for the Chairman to say it in a letter to Congress is another matter entirely. It would be construed as binding, and the SEC isn't trying to have that."

Although Santori said that he does not think Ethereum is a security - and so did other industry executives and regulators, including Hinman - there is a gap between an SEC official offering his thoughts on the regulatory nature of the SEC and the chairman of the commission stating it to Congress.

Clayton's recent statement, which could be viewed as a positive step toward cryptocurrency and ICO regulation, does not provide enough clarity on the regulatory nature of most tokens and does not definitively show that Ethereum is not a security.

As SEC official Hinman said last year, the definition of a token as a security will continue to be a case-by-case scenario that could differ based on time frames.

Once a token or a blockchain project begins to rely on a central group of developers or authorities, it could run into the risk of being described as a security in the U.S. Characterizing Ethereum as a security could be detrimental to the growth of the global blockchain sector.

In December 2018, as Cointelegraph reported, Chairman Clayton said that ICOs could be an effective way for entrepreneurs and teams to raise capital, but it has to be done in the right way - i.e., following the securities laws of the U.S. "I believe that ICOs can be effective ways for entrepreneurs and others to raise capital. However, the novel technological nature of an ICO does not change the fundamental point that, when a security is being offered, our securities laws must be followed."

The SEC is an enforcement agency that interprets the existing securities laws in the U.S. If changes are made to the securities laws, it may alter the way the SEC characterizes tokens and cryptocurrencies in general.

In the foreseeable future, the SEC is expected to go over ICOs and token sales in a case-by-case basis, evaluating whether certain tokens or crypto assets represent potential security transactions within the regulatory framework of the U.S..