The Securities and Exchange Commission (SEC) has recently drawn attention after modifying the biography page of former Division of Corporate Finance Director, William Hinman. The changes sparked speculation among digital asset enthusiasts, considering Hinman’s relevance in the SEC’s ongoing case against Ripple over the XRP token.
Digital asset supporters keenly remember Hinman’s 2018 speech, in which he expressed his views on decentralization and the regulatory classification of Bitcoin and Ethereum. Hinman suggested that both cryptocurrencies should not be considered securities due to their level of decentralization. However, the current bio page of Hinman only shows a brief period of his service with the SEC, leaving out details about his past accomplishments.
These alterations occurred amidst Ripple’s legal battle with the SEC. Ripple was accused of selling XRP without registering the token as a security in late 2021. This case brings to the forefront the question of when a token should be considered a commodity, subject to regulation by the Commodity Futures Trading Commission, and when it should be treated as a security under SEC jurisdiction.
The judge involved in the SEC vs. Ripple case recently denied the commission’s motion to avoid publishing documents related to Hinman’s controversial speech. Court documents disclosed during the discovery process suggest that Hinman might have met with organizations closely tied to Ethereum, such as ConsenSys and the Ethereum Foundation, during the time he made his decentralization claim.
In parallel to the legal battle, Hinman’s notion of decentralization is finding its way into legislative proposals targeting the digital assets industry. For instance, a draft bill sponsored by Republican lawmakers contemplates adopting Hinman’s views on what constitutes “sufficient decentralization” for a crypto project. Messari founder Ryan Selkis noted that the proposed bill could lead to significant SEC oversight but may also offer a path to Safe Harbor for certain projects.
This Safe Harbor reference pertains to the proposal put forth by SEC Commissioner Hester Pierce in 2021, known as Safe Harbor 2.0. Under these guidelines, crypto projects would have a three-year window to ascertain whether their tokens qualify as securities, as long as they comply with reporting requirements during that time. Ultimately, Hinman’s perspective on decentralization may have a lasting impact on the landscape of digital asset regulation and industry moves.