Ethereum & ICOs & The SEC Scrutiny

Ethereum, is under regulatory scrutiny by the Securities and Exchange Commission (SEC), which is considering whether it should be classified as a commodity or a security.

Etherium

Etherium

The SEC is exploring options over Ether, whether the cryptocurrency would fall under the authority of another agency as a commodity, according to a report in the Wall Street Journal.

“I think the flexibility is there to come out in either direction,” said Zach Fallon, a former senior council with the SEC who is now a securities law attorney and consultant as well as senior legal advisor for Dispatch Labs

“With bitcoin, there was no offer of investment opportunity in way that would trigger the Howey test,” Fallon said. “The efforts to create bitcoin came solely [from] the miners themselves in securing the network. And, in that regard [bitcoin] wouldn’t pass the Howey test.”

SEC decision to classify Ethereum’s Ether cryptocurrency as a security could have far-reaching consequences for other digital monies originally crowdfunded through initial coin offerings (ICOs).

By pre-selling Ether, Ethereum could be viewed by the SEC as a common enterprise that had influence over its value, similar to how a public company’s actions are key to its stock’s value.

The SEC’s determination will likely hinge on precedence set by a Supreme Court decision that has become known as “the Howey test.” Unlike bitcoin, which is treated as an asset by the IRS, and is virtually unregulated, ICOs are by definition securities because they pass the Howey test; the test determines whether a financial transaction qualifies as an investment contract and thus is a security.

Tags: Ether, cryptocurrency, ether sec, Ethereum, Ethereum regulation, Ethereum news, Ethereum updates

Mohsen Daemi
Latest posts by Mohsen Daemi (see all)