SEC Chairman has finally said that Ethereum is not a security but that is no reason to rejoice. If you think that the headlines like “ETH Token is not security says SEC Chairman” spells good news – think twice.
This is the pertinent portion of the letter
“I agree that 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. A digital asset may be offered and sold initially as a security because it meets the definition of an investment contract, but that designation may change over time if the digital asset later is offered and sold in such a way that it will no longer meet that definition. I agree with Director Hinman’s explanation of how a digital asset transaction may no longer represent an investment contract if, for example, purchasers would no longer reasonably expect a person or group to carry out the essential managerial or entrepreneurial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.”
What others have conveniently ignored and what I think is the key to his statement is “for example, purchasers would no longer reasonably expect a person or group to carry out the essential managerial or entrepreneurial efforts.” What this means is that any digital asset is a fraud unless it proves otherwise in the long run. What Commissioner Clayton has essentially said is that Digital Assets do not deserve to be security tokens.
Some have observed that it might be a ploy for the SEC to wash their hands of the thorny issue and let its sister concern CFTC (Commodities and Futures Trading Commission) deal with the issue. I do not read anything of the sort. They have not deflected the question and they have never given any indication that they would rather CFTC answer on the issue.
So, is this good news for the blockchain token industry or a bad one? Depends on who you are. If you are a token issuer, it makes no difference to you. You still cannot go around getting money easily from US-based investors. Your tokens do not have any legal standing in the US. if you are one like me, a guy who is banking on “Security Tokens”, it is a step forward but not a stride. For the investors, it is a semi-warning. The wait to see these token listed on a bonafide exchange in the US just got longer.
Overall, it is a non-event. He has basically stated what we knew was his belief from day one. he has been against tokens being called securities and while he may be correct in his own domain, I believe he is still missing the larger picture.