On June 13, 2023, the Securities and Exchange Commission (SEC) released a trove of internal documents related to a 2018 speech by former Director William Hinman.
In the speech, Hinman said that Ether, the native cryptocurrency of the Ethereum network, should not be considered a security. The Hinman documents could have a significant impact on the SEC’s ongoing lawsuit against Ripple Labs, which is accused of selling XRP, another cryptocurrency, as an unregistered security.
SEC Officials Could Not Agree if ETH Was a Security
The Hinman documents reveal that the SEC was divided on the issue of whether Ether should be considered a security. Some officials argued that Ether should be considered a security because it was initially created through an initial coin offering (ICO), which is a type of fundraising that is often used to launch new cryptocurrencies. Others argued that Ether should not be considered a security because it is now sufficiently decentralized, meaning that it is not controlled by any one entity.
The SEC ultimately decided not to take enforcement action against Ethereum, but the Hinman documents suggest that the agency is still grappling with the issue of how to regulate cryptocurrencies. The documents could also be used by Ripple in its defence against the SEC’s lawsuit. Ripple has argued that XRP is not a security because it is used to power the Ripple network, which is a global payments system.
The release of the Hinman documents is a significant development in the ongoing debate over the regulation of cryptocurrencies. The documents provide valuable insights into the SEC’s thinking on this issue, and they could have a major impact on the future of the crypto industry.
What are the implications of the Hinman documents?
The implications of the Hinman documents are still being debated, but there are a few potential outcomes that could arise from their release.
- The SEC could change its position on Ether and XRP and decide that they are not securities after all. This would be a major victory for the crypto industry, and it would likely lead to a wave of new investment in cryptocurrencies.
- The SEC could continue to argue that Ether and XRP are securities, but it could face increased scrutiny from Congress and the courts. This could lead to a more favourable regulatory environment for the crypto industry, as lawmakers and judges may be reluctant to second-guess the SEC’s expert judgment.
- The SEC could take no action at all and simply let the Hinman documents stand as a statement of the agency’s current thinking on the issue of cryptocurrency regulation. This would be a status quo outcome, and it would likely lead to continued uncertainty and confusion in the market.
It is still too early to say what the ultimate impact of the Hinman documents will be.
However, their release is a significant event in the history of cryptocurrency regulation, and it is likely to have a major impact on the future of the industry.
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