ETHEREUM IS NOT A SECURITY – WILLIAM HINMAN STATEMENT (SEC)

ETHEREUM IS NOT A SECURITY - WILLIAM HINMAN STATEMENT

SEC Director of Corporate Finance, William Hinman, told the visitors at the All Markets summit in San Francisco that the SEC does not yet plan to equate the Ethereum with securities. He cited the fact that in the case of the ether there is no certain responsible company or person, therefore such a virtual coin can not be considered an invest-contract. Earlier, Jay Clayton, (head of the SEC), said that bitcoin is not a security.
For the SEC, while cryptocurrencies like bitcoin and ether are not securities, token offerings for stakes in companies that are built off of those blockchains can be, depending on the extent to which third parties are involved in the creation or exchange of value around the assets.
The key for the SEC is whether the token in question is being used simply for the exchange of a good or service through a distributed ledger platform, or whether the value of the cryptocurrency is dependent on the actions of a third party for it to rise in value.
“Promoters, in order to raise money to develop networks on which digital assets will operate, often sell the tokens or coins rather than sell shares, issue notes or obtain bank financing. But, in many cases, the economic substance is the same as a conventional securities offering. Funds are raised with the expectation that the promoters will build their system and investors can earn a return on the instrument — usually by selling their tokens in the secondary market once the promoters create something of value with the proceeds and the value of the digital enterprise increases,” Hinman said.
However, there are tokens based on the Ethereum blockchain, which do not fall under the definition of securities. Their main differences are the exchange of the token for the product / service of the project (use within the project), the orientation to use (consumption) of the token, rather than its turnover in the secondary market, the existence of the product until the release of the tokens.
An excellent example of such utility-token is the ERC-20 PROD token of the company Darenta – carsharing which is based on the blockchain. The token is actually used inside the platform – namely, 1 token gives a 50% discount on the commission of the carsharing. In addition, the token can be used in 16 other ways, as payment for various services of the company or for encouraging users. For PROD tokens, you can even buy a franchise of Darenta. The founder of the platform focused his ICO campaign on the development of the project and on the use of blockchain in the project, rather than on collecting investments with speculative purposes.
The SEC has not yet reached a final position on all ICO projects, but even now it can be said that the token of projects such as P2P carsharing Darenta, inside which the token is actually used by the consumer who are users of the project, are less likely to be classified as security.

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