By
Steve Muchoki
April 17th, 2024
In his answer letter, Jay Clayton opens up on defining ICO tokens as securities saying that there cannot be a static approach to deal with different crypto assets. Meanwhile, according to the agency’s laws, Ethereum is not the case.
Jay Clayton, Chairman of the U.S. Securities and Exchange Commission (SEC) has confirmed that Ethereum (ETH) doesn’t qualify as a security under the agency’s laws. The latest confirmation has cleared the air over the long going suspicion of treating ETH as a security.
Last year in June 2018, SEC Director of Corporation Finance William Hinman also said that ETH doesn’t exhibit the properties of a security. Thus, there was no central group behind the release of the world’s second-largest crypto token, as per Hinman.
No Static Definition to Treat Digital Assets As Securities
U.S. Congressman Tedd Budd worked with non-profit crypto research organization Coin Center asking whether the SEC Chairman agrees to Hinman’s views. In a post on Tuesday, March 12. Coin Center has published Clayton’s response regarding this matter. In his answer letter last week on Thursday, March 7, Jay Clayton agrees that one cannot have a “static” definition of treating digital assets as securities. Also, the definition is subject to change and can vary over time.
Clayton further notes that even if the digital asset begins as a security, its designation might change with time. He writes: “if the digital asset later is offered and sold in such a way that it will no longer meet that definition.”
Without explicitly mentioning ETH, Clayton states that he agrees to Director Hinman’s views expressed last year. Clayton wrote:
“I agree with Director Hinman’s explanation of how a digital asset transaction may no longer represent an investment contract [a security] if, for example, purchasers would no longer reasonably expect a person or group to carry out the essential managerial or entrepreneurial efforts.”
SEC Chairman’s Past Comments
The SEC Chairman Jay Clayton has spoken a number of times on treating ICO token as securities. Each time when asked, Clayton has said that he is quite firm on his view regarding it. during a CNBC interview in June 2018, Clayton said:
“If you have an ICO or a stock, and you want to sell it in a private placement, follow the private placement rules. If you want to do any IPO with a token, come see us. File financial statements, file disclosure, take the responsibility our laws require.”
In December 2018, Clayton also hinted that ICOs can be effective for entrepreneurs to raise capital. However, he stressed that they need to abide by the SEC rules. “If you finance a venture with a token offering, you should start with the assumption that it is a security,” Clayton said.
Despite being critical of crypto assets, Clayton is quite optimistic about the blockchain technology. “Blockchain technology has incredible promise for securities and other industries. I think we all can agree on that… It greatly reduces transactions costs, including the costs of verification. It’s a powerful technology,” he added.