Internal SEC discussions unveil worries over Ether's classification.
The documents, recently unveiled and linked to Bill Hinman, a former director of the Security and Exchange Commission's corporate finance division, suggest an underlying concern over his 2018 statement, which inferred that Ether (ETH) may not be a security.
This revelation implies that the affirmation of Ether not being classified as security could trap the SEC in a stance that might be challenging to alter afterward. An extract from the SEC's commentary associated with the edits issues a cautionary note on this potential issue.
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In particular, the revised documents stated:
Even with the caveats in the sentence, it seems that it would be difficult for the agency to take a different position on Ether in the future. Further, the rest of the paragraph strongly implies that the thinking applies to Ether.
This edit is particularly enlightening, as it suggests a potential hesitance within the agency to establish a fixed classification for Ether.
The documents in question—referred to as the Hinman documents—comprise internal SEC messages linked to a 2018 speech delivered by Hinman himself.
In his address, Hinman expressed his view that while cryptocurrencies like Bitcoin (BTC) and Ether could initially be seen as securities, they could evolve into commodities as they achieve sufficient decentralization.
Brad Garlinghouse, CEO of Ripple, hinted on June 12th that the reveal of these documents would yield valuable insights. This revelation comes at a tumultuous time for the cryptocurrency sphere.
The SEC first took legal action against Ripple in December 2020, accusing it of running an unregistered securities offering through the sale of its native XRP token. Ripple has since refuted this claim, asserting that XRP does not meet the criteria of the Howey test and hence should not be classified as a security.
It should be noted that these events coincided with a federal court hearing on June 13th regarding the SEC's move to freeze Binance.US's assets, further exemplifying the legal complexities currently plaguing the crypto industry.
The unveiling of the Hinman documents has not only introduced a new dimension to the ongoing debates over the status of Ether and other cryptocurrencies but also revealed the SEC's internal concerns over declaring Ether as a non-security asset.