U.S. SEC official says ether not a security, price surges
By Anna Irrera
NEW YORK (Reuters) - The price of ether rose on Thursday after a senior official at the U.S. Securities and Exchange Commission stated that the cryptocurrency was not a security, thus exempting certain transactions in the token from federal securities laws.
Ether is the second-largest cryptocurrency by market cap after bitcoin and is powered by a technology called Ethereum.
"Putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions," William Hinman, director of the SEC's division of corporation finance, said in a speech prepared for a conference in San Francisco.
"And, as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value."
The remarks come after months of speculation as to whether ether would be deemed a security by U.S. regulators, making it subject to more stringent rules than bitcoin.
For example if deemed a security, websites offering trading in the token would have required licenses from federal regulators.
The price of one ether rose as much as 11 percent to $520.68. It has fallen more than 60 percent since its peak in January.
The price of bitcoin
The remarks could lower the barriers for mainstream financial products based on ether, including futures contracts.
"This announcement clears a key stumbling block for Ether futures, the case for which we've been considering since we launched the first Bitcoin futures in December 2017," Chris Concannon, president and chief operating officer at Cboe Global Markets Inc (NASDAQ: CBOE) said in a statement.
Financial watchdogs across the world have intensified their scrutiny of cryptocurrencies following last year's rally in prices and a surge in types of new coins.
Regulators have focused on initial coin offerings (ICOs), online fundraisers where new cryptocurrencies are sold. More than 1,600 different tokens are in existence, according Ccoinmarketcap.com
SEC chair Jay Clayton said in February he believed most of these sales were securities offerings. Ether was issued following an online crowdsale held in 2014.
While Hinman provided clarity on ether, he reiterated the agency's views on ICOs and shared further guidelines to assess whether a token is a security.
Among these are considerations as to whether any group or entity has maintained a large stake in a token such that the group's efforts could lead to an increase in the asset's price, he said.
(Reporting by Anna Irrera; Editing by Meredith Mazzilli)