SEC official: Ether is not a security

SEC official: Ether is not a security
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The Securities and Exchange Commission (SEC) said on Thursday that it does not consider the popular cryptocurrency ether to be a security.

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“When we look at how ether today is operating, we see a highly decentralized network, and we don’t see a central third party," SEC official William Hinman said at a Yahoo Finance summit on cryptocurrency in San Francisco on Thursday.

The announcement will likely be strongly welcomed by the cryptocurrency community, which has argued that most decentralized digital assets do not function like securities of a company and accordingly should not be regulated like them.

Unlike shares of a company, the value of digital assets like bitcoin and ether (the underlying currency of ethereum) are not tied to a single company.

The SEC’s position is particularly significant given ether’s status as the second largest cryptocurrency in terms of market capitalization. The only cryptocurrency larger than ether is bitcoin.

The D.C. based cryptocurrency Coin Center group praised Hinman’s remarks.

"We are glad the SEC agrees with our long-held analysis of how securities law applies to decentralized cryptocurrency networks like Bitcoin and Ethereum,” said Coin Center executive director Jerry Brito. “With this guidance, the SEC is showing that taking a pro-innovation approach does not have to come at the expense of protecting investors."

While the SEC has decided that ether is currently not a security, Hinman left open the question of whether it was at one time.

“Can a digital asset originally sold in a securities offering eventually be sold in something other than a security?” he questioned. “How about cases when there’s no longer a company? I believe in those cases the answer is a qualified yes.”

The ambiguity means that there is still an opening for the SEC to take action on or regulate other digital tokens.

SEC Chairman Jay Clayton has already sparked concerns among cryptocurrency investors and developers by saying that most or all initial coin offerings he has seen appear to be securities offerings.

The agency also has launched a slew of action against alleged scam initial coin offerings and other fraudulent crypto schemes.