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Bitcoin and similar cryptocurrencies are not securities: Head of the SEC

Many cryptocurrency enthusiasts are wondering if the policy which is announced in the middle of last year by the director of corporate finance at the US Securities and Exchange Commission, William Hinman serves as the official line of the department or is it just an employee’s opinion.

Congressman Ted Budd along with a group of journalists sent a letter to SEC Chairman Jay Clayton asking if he agreed with Hinman. The chairman replied:
“You also ask if I agree with certain statements regarding digital tokens that were sounded in June 2018 in the speech of Director Hinman. I agree that the answer to the question of whether a digital asset is offered or sold as a security is not static in nature and is not due to the strict nature of the instrument. A digital asset may initially be offered or sold as a security since it meets the definition of an investment contract. But over time this designation may change if the digital asset is sold and offered so that it no longer meets the definition. I agree with Director Hinman’s explanation that a digital asset transaction may no longer represent an investment contract if buyers no longer expect a person or group to act as managers or entrepreneurs. In this case the digital asset may not represent an investment contract in accordance with Howie’s test criteria. ”

The authors of the letter to Clayton notice that they are satisfied seeing that the head of the department applies the Howie test to cryptocurrencies. According to them this indicates a carefully weighted approach.

Last year in June, speaking at the Yahoo All Markets Summit, William Hinman said: Crypto summit said that the Securities and Exchange Commission did not consider Bitcoin or Ethereum as securities.

For asset buyers the key issue is investment income. Thus, if there is a certain (central) third party and buyers with the expected profit, then this is most likely a security. In this regard, Hinman clearly said that Bitcoin is not a valuable paper, since it is decentralized. Ether is also not a security, because its network is also decentralized network. Hinman remarked: “The sale of the air is not a transaction with securities in my understanding of its current status, the network of the ethereum and its decentralized structure”.

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