The U.S. Securities and Exchange Commission (SEC) has been relatively stringent in its views of both security and utility tokens. The organization is seeking to label all virtual tokens originally distributed through initial coin offerings (ICOs) as securities, which would subject them to very strict regulatory practices and potentially have massive repercussions on their prices.
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One of those tokens is ether, which was originally distributed and marketed through presales. Members of the Venture Capital Working Group — an organization comprised of lawyers, investors and cryptocurrency experts working to block the SEC’s decision — argue that ether has become so decentralized, it can no longer be looked at as a security, and should thus be exempt from securities-related laws. Ether is the world’s second-largest cryptocurrency by market cap after bitcoin.
April 26, 2018, marked an important step in the fight for “token rights.” A congressional hearing with testimony from the SEC’s Division of Corporation Finance (the organization directly responsible for establishing token policies) took place to potentially develop more reasonable approaches toward token sales and their classifications.
Minnesota Representative Tom Emmer led the discussion with SEC division head William Hinman. Throughout the hearing, Emmer voiced his support for cryptocurrency entrepreneurship and innovation, stating, “People tend to fear what they don’t know. If people sailing the oceans at the time of Columbus had believed the world is flat, we wouldn’t have had the great discoveries of the New World.”
The discussion marks a new attitude amongst SEC members. Chairman Jay Clayton has reported in the past that he wants to see all tokens registered through ICOs be classified as securities in the future, but Hinman assured listeners that representatives are trying to view the situation openly and see which entities might exhibit utility-based behaviors.
During the hearing, Rep.
