Standard Kepler

SEC Statement Clears the Way for Ethereum Futures

06/11 – 06/17

SEC Statement Clears the Way for Ethereum Futures
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WEEKLY RECAP

  • Total market cap. reached $281.28 bn (a 13.2% decrease), where 7 day trading volume slumped by 11.6% for top 100 crypto


WEEK AHEAD

  • 20 June: BTC to participate at the Crypto Valley Conference in Zug, Switzerland
  • 21 June: TRX to launch migration from ERC 20 tokens to TRX’s public blockchain


THOUGHTS OF THE WEEK

It would seem the debate on the nature of Ethereum (ETH) may have come to an end this week with U.S. SEC Director of Corporate Finance Willian Hinman’s 14 June statement that ETH is not a security given its present state and the decentralized structure of the Ethereum network.

We believe one of the main rationales behind this statement stems from the fact that ETH does not satisfy the criteria of the Howey test. In particular, as ETH is mainly used to operate and deploy smart contracts on the Ethereum network, the purchaser of ETH does not expect profits solely generated by a third party. This is supported by the fact that no parties can make managerial decisions on ETH, which eases the SEC’s concerns regarding insider trading issues.

Furthermore,  the investment into ETH is not retained by a common enterprise. Instead, the distribution of ETH is decentralized and the supply of ETH is determined by mining. Given the decentralized nature of ETH, it will be difficult for the SEC to identify any entities responsible to make requisite disclosures, thus we can foresee that the effectiveness in regulating ETH under federal security laws would be limited. Mr. Hinman stated, that “As with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value. ”

Following the above statement on 14 June, the price of ETH surged from 0.729 BTC to 0.784 BTC, as noted in our Chart of the Week. Ethereum futures are already trading in the United Kingdom, but Chris Concannon, president of exchange holding company Cboe Global Markets, commented on the news that “the announcement by U.S. SEC clears a key stumbling block for ether futures [in the U.S.]”

 

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