Bitcoin Forum

This ruling makes sense, and is an important ruling because it makes a clear distinction between an existing cryptocurrency, which has utility inherent within it, versus an initial coin offering that raises capital for a yet to be created cryptocurrency, which until it exists, has no utility.  



Ethereum isn't an ICO; instead, it is a blockchain network and development platform.  It has a cryptocurrency, ether, associated to this blockchain.

The Ethereum ICO ended several years ago, where it raised scores of millions USD so that the Ethereum Foundation could create the software that is the Ethereum Platform.

An ICO is a fund raising method where investors buy rights to a specified number of tokens in the future.  These "rights" are a security for several reasons according to US Law.  First, on issuance they have no inherent value because you can't use them as a medium of payment, can't trade them, or can't exchange them for fiat currency.  Second, and perhaps most importantly, according to the US Securities and Exchange Commission or "SEC" because the reason investors buy these rights is they expect it to go up in value over time resulting in a profit when they can trade them or exchange them, that by definition in US Federal Law makes an ICO a security.

The reason why some ICOs are outlawed, at least in the United States, is because they don't follow US Federal Law for securities.  These laws protect unsophisticated investors from scams, where the organization offering the ICO defrauds investors.  ICO scams are prevalent.  Thus why the SEC is investing a lot of energy into enforcing US Federal Law..

So, there is a HUGE difference between Ethereum and ICOs.

Now, what is less of a distinction, and the reason why the SEC ruling is so important, is the difference between a cryptocurrency such as ether and a security, like commodities such as gold, oil, and silver.  Presently, most purchases of ether, and other cryptocurrencies, is as a store of value with the intention to hold it until it goes up in value.  In this way it is a security per US law.

Here is the key distinction... some cryptocurrencies such as bitcoin and ether can be used as a medium of payment.  This means they have inherent value because sellers are willing to trade a cryptocurrency for goods or services.  Further, there are currency exchanges that will exchange a cryptocurrency for fiat currency.  This means they are liquid.

The is gist of this ruling.

Here is the key distinction... some cryptocurrencies such as bitcoin and ether can be used as a medium of payment.  This means they have inherent value because sellers are willing to trade a cryptocurrency for goods or services.  Further, there are currency exchanges that will exchange a cryptocurrency for fiat currency.  This means they are liquid.

The is gist of this ruling.

By declaring ICOs a security, it restricts investors residing in the United States to only "Accredited Investors".  This means only Accredited Investors may invest in ICOs.  That's unfortunate to savvy investors who are quite capable of distinguishing a scam from a legit ICO as well as can responsibility restrict their investment budget, BUT who aren't Accredited Investors.

The SEC’s leader on cryptocurrencies and initial coin offerings (ICOs) says that Bitcoin and Ether are not securities but that many, not all, ICOs are securities and will come under the regulatory control of the SEC.

“Central to determining whether a security is being sold is how it is being sold and the reasonable expectations of purchasers,” William Hinman, head of the Division of Corporate Finance for the SEC.

Hinman noted that the central issue in determining whether cryptocurrencies and ICOs were securities was the expectation of a return by a third party, specifically whether there was a person or group that sponsored the creation and sale of the asset, and who played a significant role in its development and maintenance. If consumers are promised or are respecting an appreciation in value, and there is a centralized third party, then it can be classified as security according to Hinman.

Hinman specifically said that Bitcoin is not a security because it is decentralized: there is no central party whose efforts are a critical determining factor in the enterprise. Likewise, Ethereum cannot be considered a security because the Ethereum network is decentralized.

Mr. Hinman did not address the securities status of other cryptocurrencies, like Ripple (XRP), which is on the wrong end of a lawsuit alleging that it is a security. Additionally, a platform like EOS, which is controlled by Block.one, seems to be a likely contender for securities regulations. EOS’s system of validation, which delegates power to only 21 nodes, may not be enough decentralization in the eyes of the Securities and Exchange Commission.

Investors have eagerly been awaiting this decision, and we can all breathe a sigh of relief that the SEC continues to favor fair regulation and encourage innovation. Security regulations in the US are stringent and a securities label could remove many US investors from the global crypto market.

News was just announced and prices have already skyrocketed. What are you thoughts on this?

So like I said: If Ethereum came out today, it would be deemed an illegal security by US law.

I guess Ethereum holders lucked out with this one. I guess they did this to not screw up the current market, but I also think someone with SEC influence is bagholding ETH and this was in their interest.

At the end of the day they are screwing up the people that could get rich from investing in something very early to save the idiots that cannot do research. Once again government regulators screwing up those that put the work (to do the research) vs these that don't put the work and invest in obvious scams such as Bitconnect

I believe his speech was not necessarily so positive because, on the other hand, the director stated everything you put money with intention to sell higher is a security, so everything else can be a security.

I was about to post this. In my book, this proves two thing:

1) That someone within the government or at least enough influence to impact's the SEC decision on deciding if Ethereum is a security or not, is bagholding massive bags of Ethereum (maybe not proves, but definitely strengthens this conspiracy theory)

2) That the altcoin bubble has just begun and will continue growing for a long time until something really bad happens technologically in any of the top 10 altcoins, when that happens a mass exodus into Bitcoin will ensue.

*They* are also bagholding bitcoin. I'm pretty sure banks invest in crypto meanwhile they said people to stay away from it // "invest in gold, silver, forex... cryptomarket is a dangerous snake"


The altcoins just wait for the next generation, maybe TON will show the future with a real daily use.