Earlier this month, the Securities and Exchange Commission  (SEC) announced that ether, a virtual currency, will not be regulated as  a security. This news alone saw the price of ether rise by 9.4%, from  $468 to $515. The price of bitcoin also rose by 4.8%, from $6,300 to  $6,645 following a statement made by William Hinman, SEC’s Director for  Corporation Finance.

Speaking at a finance conference in California, Hinman went  on record having said that based on ether’s current state, its  decentralized nature, its present offers, the Ethereum network and its  sale, its transactions do not constitute securities.

According to Jori Falkstedt, CEO of GlobalSpy, the Ethereum platform has multiple uses and this recent statement by Hinman seems to acknowledge this fact.

He says, “Ethereum has many uses from exchange instrument  to crypto project’s operating environment and its enormous popularity,  has already acquired a position that is difficult to threaten at least  in the short run. The news that acknowledges these facts and  acknowledges it not security will certainly give it more credibility  even as an investment element and add to its popularity. This will also  increase Ethereum’s certainty of competition, and Etherium is becoming  increasingly difficult to be threatened.” 

A Win for Crypto Industry?

A determination on whether ether is a security or not was  critical for the cryptocurrency industry. This is because a debate has  raged in the industry on whether or not tokens issued via initial coin  offerings are securities.

For many cryptocurrency players, Hinman’s statement  presents a winning moment for an industry that has struggled with  finding footing in an uncertain regulatory environment that has  been persistent since the beginning of the year.

With this statement, companies that have kept off the  cryptocurrency space for lack of clarity now know whether things stand  according to David Scheckel, CEO of Oxford BioChronometrics.

He says, “This is a strongly positive move by the SEC.  Companies that have been hesitant to enter into the world of blockchain  are likely to be encouraged by this news and the clarity it brings.  Those new participants won’t just be able to benefit individually from  token sales and ICOs, the entire ecosystem will be better for it. The  greater the number of participants in an open-source environment, the  better it is for the robust growth.” 

A Securities Past

Even so, some players argue that based on its past, ether  does pass the securities test and also because it does produce profits  for its buyers.

Alex Karasulu, CTO, and Founder of OptDyn  says, “There’s been contradictory, good cop, bad cop, commentary coming  out across different high ranking officials at the SEC within days of  each other. Looking deeper, a clear pragmatic enforcement message  appears in Director Hinman’s good cop comment coupled with Chairman  Clayton’s bad cop comment just days before.”

“Ethereum, it could be argued, passes the Howey test as a  security. The Ethereum Foundation’s efforts after receiving capital in  exchange for Ether coins benefited purchasers. The foundation used the  capital to improve the Ethereum blockchain and made it possible to have  others conduct ICO after ICO. This transferred wealth to the main  Ethereum Blockchain from fiat currencies and other cryptocurrencies. It  also increased the value of Ether. The capital provided to the  foundation financed the work of others to produce a return for Ether  buyers,” Karasulu adds.

Ether was developed in 2014 partly as a way of helping to  finance the Ethereum Foundation. Ether tokens were developed during a  crowdfunding campaign that raised bitcoins worth $8 million. Though it  has always been viewed as a cryptocurrency for the Ethereum network, it  was used to raise capital and for this reason, the SEC started  evaluating whether it is a security or not.

There were fears over the SEC declaring ether as a security  because that would have affected not just ICOs, but also exchanges,  startups and other outfits in the cryptocurrency market.

Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article. 

Original Article Posted on CoinFrenzy