Ethereum…it’s the dominant smart contract platform that many have come to love.
It’s pioneered those contracts, defi, nfts, and whatever else will come next.
But bad news might be around the corner for Ethereum…as regulators mount up.
What am I talking about?
Find out in about just over 10 minutes…because it’s time for Chico Crypto!
The Ethereum ICO, or initial coin offering.
How did Ethereum go about raising funds?
Well the ICO officially commenced in the summer of 2014.
July 22nd to be exact.
The sale lasted until September 2nd of that year, and for user’s to participate and
get ether tokens, they had to send Bitcoin, at least .01, to a certain BTC address.
On that special day, July 22nd.
Vitalik Buterin even posted a blog about the public sale…titled “Lauching the Ether
Sale” and in the blog, details were provided.
Like estimates of when participants would get their tokens, how many tokens they would
get.
But then Vitalik said this.
“Ether is a product, NOT a security or investment offering.
Ether is simply a token useful for paying transaction fees or building or purchasing
decentralized application services on the Ethereum platform; it does not give you voting
rights over anything, and we make no guarantees of its future value.”
And then….this.
“We are not blocking the US after all.
Yay.”
The two decisions and statements.
That just might come back to bite Ethereum in the booty.
Ethereum isn’t a security and allowing US persons to participate in the ICO.
Why do I say this??
Well things are really heating up in the conversation about Ether’s non-security status…
Now there are only 2 assets in cryptocurrency that in the past have fallen out of the grasp
of the SECs power.
Bitcoin and Ethereum.
Bitcoin on multiple occasions has been denied as a security by the SEC.
More recently in 2019 the SEC responded to Cipher trace in an official letter and said
“Commission staff carefully reviewed your June 14, 2019 letter and considered your input
fromour September 27, 2019 in-person meeting, and we disagree with your conclusion that
bitcoin is a security.
We think that conclusion is incorrect under both the reasoning of SEC v. Howey and the
framework that the staff applies in analyzing digital assets.Among other things, we do not
believe that current purchasers of bitcoin are relying on the essential managerial and
entrepreneurial efforts of others to produce a profit.”
Then there was April of 2018, when SEC commissioner Jay Clayton said this while testifying in
front of Congress.
Bitcoin isn’t a security, but tokens..in which money was raised to finance a project
is a security, and Jay hasn’t observed a single token which isn’t a security.
Basically, Jay is saying even Ethereum is a security there.
So why does Ethereum get a non-security status?
Where does that come from??
Well just after Jay Clayton testified in front of Congress, another SEC official spoke about
digital assets and security status.
This was the departments Director of Corporate Finance.
William Hinman…and he spoke at Yahoo Finance’s All Market Summit.
Let’s listen in.
Bitcoin was once again re-iterated as a non security according to the SEC, but this was
the first time Ethereum was put in the same boat as Bitcoin.
Ethereum had achieved non security status.
And that has been the case since 2018 up through 2021.
But since the clock has turned into 2022, Ethereum’s non security status is in hot
water.
Why?
Well it has a lot to do with the Ripple XRP versus the SEC case.
If you didn’t know…over a year ago, December of 2020 the SEC charged Ripple and two of
their executives with conducting an unregistered securities offering.
The SEC had the opinion that XRP the token was indeed a security.
Of course Ripple is fighting the charges tooth and nail.
They are looking to win this case and have their token put in the same basket as Bitcoin
and Ethereum.
That non security basket.
But in this fight, they just might be dragging Ethereum down with it.
Regarding the status of XRP, Ripple Labs subpoenaed William Hinman to offer his deposition, a
sworn testimony under oath to clarify the SEC’s internal views and policy decision-making,
among other issues.
Well at first things weren’t looking necessarily good for the XRP.
In a July Deposition this is what Hinman said about XRP and their public sale.
“Basically my answer would be what I told--what I remember telling Mr. Ceresney and Meridith
Cross about my views on XRP, that I viewed it as a security and I viewed the continuing
offerings---periodic offering of XRP in a way where they were not restricted in the
way a securities offering would be restricted and therefore exempt or they weren’t registered
as a problem under the securities laws.
If they were interested into coming into compliance they should start by stopping those sales.”
Hinman personally viewed XRP as a security, and the way RIpple was periodically selling
XRP constituted security offerings.
They needed to stop those sales, and restructure the way they were doing it…. but they didn’t.
Although, this deposition wasn’t only about Hinman’s thoughts on XRP…it was also about
his thoughts on Ethereum.
As we can see…Ethereum was brought up within this deposition.
Why are they looking at Ethereum?
Well Ripple wants to find out why Ethereum was classified as a security.
And Ripple actually just had a big ole win in the case.
Decrypt covered it just last week in an article titled “Judge Says Ripple Can Access Emails
About SEC Ethereum Speech” and the article states “As part of its legal strategy, Ripple
has sought to obtain evidence about how Hinman decided Ethereum was not a security—evidence
that could help the company rebuff the SEC's claims about the nature of XRP.
This concerns a larger batch of documents, including notes by the SEC's crypto expert,
Valerie Szczepanik, about a variety of SEC deliberations, as well as emails in which
Hinman and others discussed a draft of the Ethereum speech”
Sooo, XRP is getting the emails from the SEC regarding this decision.
But the SEC is fighting this Ethereum decision.
In October, the SEC got Mr. Hinman to sign an affidavit, that this Ethereum speech wasn't
the view of the SEC and was his own personal opinion.
“As we can see the affidavit says “I did not reference Ripple or its digital asset
XRP in my remarks.
Instead my Speech expressed my view that current offers and sales of Ether are not securities
transactions.
My view was based on my understanding of the present state of Ether, the Ethereum network
and it’s decentralized structure.
The Speech was intended to express my own personal views.
During my preparation of the Speech, I discussed my thoughts with other Commission employees,
as part of the Commission’s ongoing deliberations about whether offers and sales of Ether constituted
securities transactions.
To the best of my knowledge, the Commission had not taken at that time, and still has
not taken, any position or expressed a view as to whether offers and sales of Ether constituted
offers and sales of securities.
Uh oh…..the main piece of evidence which keeps Ethereum out of the security bucket,
is just the opinion of Hinman, it’s not the position of the SEC.
And guess what the opinion of the current SEC chairman is??
Gary Gensler, he has said multiple times in the past Ether passes the Howey test, and
thus is
a security.
First in 2014.
Let’s listen in.
Then in 2018…
And Finally he has stated this in front of the government and a Senate Committee.
Gary obviously has a hardon for Ethereum and it’s security status.
He said all of this before getting his newest job.
He is now the chairman of the SEC….
Well Gensler was just on CNBC’s squawk box, and he sidestepped a question about Ethereum’s
security status.
Legal advice over the airwaves?
Why not just answer the question if the case is solved?
If it’s set in stone that Ethereum isn’t a security.
Why not just answer the question.
Because it’s not over…the SEC just might be coming for Ether.
Cheer’s I’ll see you next time!!