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19/05/2019
Technology

US SEC Concludes that Ethereum (ETH) is Not a Security

The US Securities and Exchange Commission’s (SEC) Chairman has decided to stick to the old perspective of the agency and has concluded that Ethereum (ETH) is not a security product. ETH  comes with a different regulatory structure, and it is more likely to be close to the cryptos. He also added that not just ETH but many similar cryptocurrencies have the same fate. The SEC has declared them as non-security products only. The names of these other currencies were not specified though.

However, this verdict of SEC is not that surprising for crypto lovers or the investors of Ethereum. They were expecting it. But, what these crypto investors are more interested in, is to know what would happen with XRP. XRP is crypto introduced by Ripple Labs. On the verdict of the SEC, US SEC head, Jay Clayton said that the commission had taken a balanced approach towards crypto.

It is true that many investors and crypto lovers look at regulatory institutions like the SEC as a risk to innovation and investors. They think it is the “boogeyman.” Jay Clayton put his point of view on this while replying to a letter issued Coin Center and praised SEC for taking a balanced regulatory step.

He said: “Overall, I believe we have taken a balanced regulatory approach that fosters responsible innovation in this area, while also protecting investors and the markets.”

Apart from concluding this decision and sticking to the previous approach of the commission, Clayton also stated that the commission would keep on using the “Howey test” along with other tests. The Supreme Court develops Howey test for finding out if a specific transaction is qualifying as an investment contract. This other tests basically helps in finding out the regulatory status of an asset.

“Generally, we look at whether the digital asset fits the definition of a security as set forth in the federal securities laws… We also apply tests developed through case law, including the well-established ‘investment contract’ test articulated by the Supreme Court in SEC v. Howey and its progeny,” he noted.

Let us find out if XRP could be an investment securities product.

Investors in crypto have been speculating and hoping that XRP can be an investment securities product and fit the compatibility criteria of the SEC. Instead of this, this crypto got listed on Coinbase, which made a few investors believe that the exchange has decided that this digital asset is not security.

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