Crypto mania has worn off a bit so far in 2018, with the price of bitcoin falling back from its stratospheric rise in 2017. Recent concerns that include exchange hacking episodes, adverse regulation in some foreign countries, and charges of price manipulation have cooled off the market for bitcoin and other cryptocurrencies.

The U.S. Securities and Exchange Commission has gotten involved in the question of whether cryptocurrencies are securities, which would require further compliance measures from companies looking to make initial coin offerings or otherwise participate in the crypto boom. Earlier this week, the SEC’s William Hinman spoke at a summit on cryptocurrencies.

Addressing the question of regulation of digital assets, the director of the SEC’s Division of Corporation Finance made an interesting assertion that advocates for crypto tokens took as potentially opening the door to a new groundswell of support for the crypto market. Yet the statement raises major questions for investors, seemingly creating a distinction that will be almost impossible to define in exact terms. Hinman’s talk centered on the idea of whether digital assets could ever not be considered a security subject to regulation.

Under the framework that the SEC administrator laid out, just about every initial coin offering would potentially involve the need for securities regulation, because in his view, the fact that a central business entity was engaged in the ICO and that the token being offered would effectively give the buyer a business interest in that entity was enough to make securities laws apply. Yet Hinman opened the door to the idea that at some point that situation might change.

Specifically, if the crypto token itself became so decentralized that it no longer represented an implicit business interest in the entity promoting it, or if the token become solely a vehicle for commerce and trade of goods and services, then it might no longer be a security. Indeed, the SEC administrator said that at least in his opinion, both bitcoin and ether had evolved to the point at which purchases and sales of the two high-profile tokens are no longer securities transactions. Read more from…

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