In response to the news that the US Securities and Exchange Commission Chairman, Jay Clayton, has confirmed that Ethereum is not a security, some initial reactions from executives in the space were noted. In correspondence analysing a report from the Division of Corporate Finance, William Hinman, Clayton reiterated that “if the network on which the token or coin is to function is sufficiently decentralized” then it is not subject to securities law.
The below crypto industry executives have provided expert commentary on the significance this has on projects in the space, indications of future regulation and the influence on institutional investment.
Vaibhav Kadikar, Founder & CEO of CloseCross, a multi-party decentralized trading platform, said,
Confirmation from SEC Chairman Clayton that Ethereum is not a security is extremely encouraging for projects in the space and institutional investors, as the criterium for crypto securities becomes more concrete. However, as regulation is inherently slow moving, it is unlikely that this assertion will have any long term effect on the rapidly evolving cryptosphere.
While progressive thinking from the SEC is a positive step forward, Clayton’s statement is simply an indication, not a guarantee, of regulation. Stipulating that the status of a digital asset offered or sold as a security is not static, crypto innovators should remain vigilant in the likely event that the historically fluid crypto security standards change.
While we should commend the SEC on these positive developments, reestablishing the level of decentralisation has previously been spoken of as a determining factor and ultimately offers nothing new. It’s good to have a second verbal confirmation, but other than a tax impact on traders and HODLers, it doesn’t change much for the entrepreneurs creating blockchain use cases.”
Lars Seier Christensen, Chairman of Concordium, the world’s first ID/KYC-ready business blockchain network, commented:
The SEC clarification of the status of Ethereum is a good first step towards overall clarity on future blockchain and cryptocurrency regulation. We believe regulators will increasingly be requiring ID-verification and the ability to track the provenance of cryptocurrency. Not all blockchains can deliver this but the ones that can definitely have a better chance of seeing mainstream adoption.
I think cryptocurrency exchanges are glad to see regulatory guidance in this case and in others as well. Understanding how to deal with a tradeable asset and the rules you need to adhere to makes it easier for the exchange to provide a valuable service to their customers.”
Rutger van Zuidam, Founder and CEO of Odyssey, an Open Innovation Program connecting innovative ideas with governmental, corporate, and non-profit partners to address complex societal challenges using blockchain, AI, and other emerging technologies, said:
It is very important to introduce more clarity in an industry where clarity is required in order to build systems of trust.
Regulatory clarity is important for the developer communities, regular users, and investors who can now develop new products and services in a more prudent way. It is also important for regulators to work closely with these blockchain ecosystems because they can not only regulate more efficiently but also help unlock the value of these new services to society.”
There is no “one-size-fits-all” approach regarding the legal qualification of a given token or digital asset. The US SEC that has always been very clear about the criteria used to qualify a given digital asset under US law, and has emphasized the need to adopt a case-by-case approach.
By placing the emphasis on the specific and unique features of digital assets, it underlines the need to re-think how current regulation applies to these new types of assets, and to work on potential adjustments to ensure the sound development of this new market.
Financial regulators are at the forefront at financial innovation and, as such, are best placed to propose legislative or regulatory adjustments when necessary. This has been the case in Europe, specifically in France, with the introduction of the PACTE Bill and the new regime that will be put in place for ICO issuers (utility token only) and crypto-asset service providers (where tokens do not qualify as financial instruments under MiFID II).
Hopefully, all of this will foster international cooperation in the field of crypto-asset regulation. Given the global nature of the crypto-asset market, it is indeed key that financial regulators around the world adopt consistent and coherent regulatory approaches vis-à-vis the crypto-asset sphere, so that the market can develop in a sustainable manner.”
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