SEC Declaration Met With Relief
The cryptocurrency market surged by $20 billion after the SEC declared that neither Bitcoin nor Ethereum are securities. William Hinman, director of SEC’s Corporate Finance division, made this announcement at the Yahoo Finance All Markets Summit. He went on to emphasise that the decentralised structures of the currencies mean that no single entity or corporation benefits.
“And putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions. And, as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value,” Hinman explained.
Although no laws have yet been passed, this statement is widely held to represent the official agency stance. ETH prices immediately spiked by 12% ($464 to $524) after the speech. Despite a reduction to $508 later in the day, this was positive news that halted what seemed like a freefall.
What Happens Next?
Despite this, the downward trend that has played out this week is likely to continue. Analysts have predicted that the market cap will drop to $250 billion before entering a mid-term recovery. Though more drops are not ideal, at the very least this statement has given the market some much-needed breathing room.
The speech was notable as the first time an SEC official publically clarified the nature of Bitcoin and Ethereum. The SEC may have offered the statement to prevent the US cryptocurrency and blockchain sectors from falling behind other leading markets.
While good news for ETH and BTC, what remained unspoken was that this position categorized all ICO’s as securities. While this was hardly a surprise after SEC Chief Clayton’s statement in February that “every ICO [he’s] seen is a security”, confirmation of this is likely to impact ICO’s and Altcoins in the short term.