Are bitcoin and ether securities? Finally, one of the biggest questions and debates in crypto has been answered by the SEC, officially. Here’s a detailed insight on why this announcement is such a big news for traditional and cryptocurrency investors.
Announcement
As per Yahoo Finance, In an announcement at Yahoo Finance’s All Market Summit: Crypto in San Francisco on Thursday, the U.S. Securities and Exchange Commission Director of Corporate Finance William Hinman said that the commission would not be classifying ether or bitcoin as securities.
Comments
Hinman said that the SEC will not be changing cryptocurrency and digital asset rules, but rather would be applying them. Previously, bitcoin and ether may have been offered as securities (like shares of a company), which would have required registration with the SEC, but a consensus has emerged that they behave and are treated like commodities,similar to gold and oil.
What’s a Security and why’s this such a big news must be everyone’s question!
What’s a security?
This is how SEC looks at it — Howey’s test.
If a buyer Invests money
- In a common enterprise
- Expecting a profit
- Predominantly from the effort of others.
Then whatever buyer is buying is a security and comes under the compliance of SEC (in the USA) and anyone’s who’s offering it needs to be registered with SEC.
Now with the above announcement of Bitcoin (BTC) or Ethereum (ETH) not a security, will not need any registration with SEC.
Hinman’s argument that Ethereum is now sufficiently decentralized to disqualify it from a securities classification appears to indicate that the altcoin will be given the all-clear and not be subjected to heavy regulation by the SEC. — CT
Why this is a big news?
This news will definitely clear some concerns and questions around the acquisition or trading of Ethereum or Bitcoin. With this, a lot of institutional investors, traditional investors and those who are skeptic about the future of these major crypto-currencies due to the involvement of SEC can now have a sigh of relief. It’s not that SEC is bad, but they all seems to be scared about the kind of hard decisions which could affect prices drastically and potentially make their investments worth $0.
Now, they can buy without worrying much about any sudden regulatory surprises or compliance related news coming out of the blue.
This reduces the volatility in prices of Ethereum and Bitcoin, also reduces manipulation by mis-interpretations of different media across the world.
This will also mean a clear road for CBOE and CME to launch futures on Ethereum. Since very long time, Bitcoin was declared as commodity and not a security, but Ethereum was dangling up there — now that it’s clarified as “Not a security”, it makes investment tool providers to make some new innovations around it.
Later, the number of opportunities that opens up and allows innovative approach on trading and utilizing Ethereum as a means of exchange can be infinite — It is now left to reader’s imagination!
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