William Hinman, an official with the US Securities and Exchange Commission (SEC) responsible for formulating the cryptocurrency policy, said that BTC and ETH are not securities, but many (but not all) ICOs are securities that will be subject to SEC and related securities laws.
Hinman said that the main factors determining whether cryptocurrencies and ICOs are securities are:
- Whether the third party expects a return, especially if a person or group of people sponsored the creation and sale of this asset and played an important role in the development and maintenance.
- For those who purchase assets, the key is whether they are seeking return on investment. Hinman specifically pointed out that BTC is not a securities and ETH is not a securities because they are decentralized.
In addition, regarding ICO, Hinman said that some digital assets may be more like consumer goods than securities, especially if not for investment but for personal use.
Why Bitcoin and Ethereum are not securities
Bitcoin does not appear to be a security for most people because decentralization is doing very well. Ethereum's relationship with the Ethereum Foundation has changed significantly from the beginning of the issue. It can be said that because Apple has developed iPhone with the money from the investment, it is said that the iPhone is a security.
Ethereum has always been a product and is a smart contract on the blockchain. Therefore, the original investor did not run for profit. This does not meet another condition of the "Howey test". It is hard to say that the original Ethereum ecological energy could not be established successfully. It is hard to say that these people came for profit. These people who participate in pre-sales want to use smart contracts. This is the reason they bought the Ether.
If bitcoin and Ethereum are securities, how much will impact the market?
If Ethereum is a security, then the exchanges registered in the United States are in trouble. They must register with the SEC before they can open Ethereum transactions. If they do not register, they will be fined. This is almost equivalent to prohibiting most Ethereum trades in the world. When the related Ethereum deal in the United States stopped, liquidity was greatly reduced and prices would definitely fall. And if Bitcoin and Ethereum are defined as securities, other digital currencies （for example, litedoge and crypterium these unknown crypto currencies）will also be affected. With these currencies exiting transactions at the same time, the blow to the coin community is hardly imagined.
Regulatory policies will be gradually introduced
Digital currencies will be very popular, and the SEC's regulations are a clear signal of legislation in the digital currency industry. Big banks are stepping up their establishment of digital currency trading counters because they also know that supervision is becoming clear.
This is great news for BTC and ETH, especially from a capital gain tax standpoint.
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