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Bitcoin and Ether Not Considered Securities

Estimated reading time: 2 minutes, 6 seconds

Many investors have questions about cryptocurrencies. And rightfully so, as this investment class is still in its infancy. However, one major question about two digital assets was answered recently by the Securities and Exchange Commission (SEC). Is Bitcoin a security? What about Ether? The answer to both is “No.”

Why doesn’t the SEC view Bitcoin and Ether as securities?

The reason for this response is the decentralized nature of both digital assets. To answer this question, let’s look at the comments made by the SEC’s Director of the Division of Corporate Finance, William Hinman:

“And so, when I look at Bitcoin today, I do not see a central third party whose efforts are a key determining factor in the enterprise. The network on which Bitcoin functions is operational and appears to have been decentralized for some time, perhaps from inception. Applying the disclosure regime of the federal securities laws to the offer and resale of Bitcoin would seem to add little value. And […] based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions. And, as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value.”

This follows a comment made by SEC Chairman Jay Clayton who said in April that as a replacement for currency, Bitcoin “has been determined by most people to not be a security.”

So, what does it mean, then, that Bitcoin and Ether, the world’s two most popular cryptocurrencies, are not investment vehicles?

The SEC believes Bitcoin and Ether shouldn’t be regulated like public stocks and bonds. When crypto becomes sufficiently decentralized, the agency doesn’t view it as a security. Token sales and initial coin offerings (ICOs), by contrast, are almost always viewed as securities by the SEC.

Not surprisingly, no one can predict how this will affect the two digital assets. Prices spiked for both cryptocurrencies following Hinman’s comments, but they are still well below late 2017 numbers. Also, the SEC’s comments in no way imply either cryptocurrency is safer than any other digital currency or traditional asset.

As with any investment asset, due diligence is essential. At present, digital asset-related scams are prevalent. With any investment opportunity, know the risks and always consult your team of professionals before making any investment.

Have questions about investing in digital assets with Kingdom Trust? For immediate assistance, chat with us via our website or call 888.753.6972 during normal business hours. You may also email us at Info@KingdomTrust.com with any questions.

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