Category Archives: SEC regulation

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SEC Chair Jay Clayton Affirms ETH No Longer a Security

Jay Clayton, the US Securities and Exchange Commission (SEC) chairman, has backed up his colleague’s earlier analysis that the world’s second-largest cryptocurrency by market cap, Ethereum network’s Ether (ETH), does not qualify as a security.

Last year, SEC Director of Corporation Finance William Hinman made a similar statement, elaborating that Ethereum doesn’t exhibit the properties of a security. He added that he didn’t observe a central group as responsible for the cryptocurrency.

In a bid to clarify the issue, Congressman Ted Budd, along with industry advocacy group Coin Center, asked Clayton for a clarification, who now has responded that he agrees “that the analysis of whether a digital asset is offered or sold as a security is not static and does not strictly inherent to the instrument”.

Clayton elaborated in a letter that a cryptocurrency can be sold as a security if it meets the definition of an investment contract after the launch. But the digital asset can later be sold without being defined as investments. He added:

“I agree with Director Hinman’s explanation of how a digital asset transaction may no longer represent an investment contract if, for example, purchasers would no longer reasonably expect a person or group to carry out the essential managerial or entrepreneurial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.”

The letter did not point out Ethereum by name, however. Clayton’s latest observations echo his earlier comments, where he compared digital assets to tickets for a new theatre play. He explained how a group of investors might be offered “a suite of tickets” in return for funding the “play”, and then these tickets can be taken as securities. However, if the tickets are only sold to each theatergoer individually at a later date, “that’s decentralized”, which does not fit within the designation of securities.

 

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US SEC’s FinHub Ready to Hit the Road to Engage Crypto Entrepreneurs

SEC

The US Securities and Exchange Commission (SEC) will arrange a road trip to reach more and more crypto entrepreneurs around the country and get their feedback according to an official notice.

The SEC’s branch responsible for interactions with tech startups, known as FinHub, will visit major US cities and set up face-to-face meetings with crypto entrepreneurs.

On 26th March, the road trip will begin at the SEC’s local office in San Francisco. Next stop will be Denver.

SEC’s senior advisor for digital assets and innovation, Valerie Szczepanik, explained that FinHub staffers will not provide any legal advice during the meeting. They will only answer startups’ projects related queries. Primary purpose is to provide general guidance, maintained Szczepanik.

In the past, crypto startups have self-reported potential securities law violations to SEC. One such example is that of Gladius Network LLC, which reported irregularities itself and SEC refrained from fining the startup. Moreover, other startups which cooperated with the agency were charged relatively less.

Szczepanik stated that “Local P2P” aims at helping crypto startups to “put a human face on the regulator”. It is important to collect data regarding “friction points” directly from the stakeholders. SEC can then think about the appropriate regulatory response to those friction points, believed Szczepanik.

However, it is still unclear that how many startups will be interested in the meeting, scheduled on 26th March. According to the reports, only a few startups have provided feedback to FinHub so far.

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