JPMorgan, a leading global financial services firm, recently expressed its belief that the release of the Hinman documents in the ongoing legal battle between Ripple and the US Securities and Exchange Commission (SEC) could benefit ethereum (ETH). In a Thursday research report, JPMorgan analyst Nikolaos Panigirtzoglou highlighted that internal SEC messages related to a 2018 speech by former Director William Hinman suggest ether did not look like a security.
The report disclosed that the SEC officials acknowledged back then that the “fact that tokens on a sufficiently decentralized network are no longer securities creates a regulatory gap.” Panigirtzoglou elaborated that this implies the existence of another category, which is neither a security nor a commodity. This new category may demand protection for purchasers.
According to the Howey test, a legal test used in the United States to ascertain whether a transaction qualifies as an investment contract or is considered a security under federal law, the more decentralized a cryptocurrency, the higher its probability of evading categorization as a security.
JPMorgan analysts suggested that the SEC’s refraining from taking action against ether so far this year, while targeting other crypto tokens, could be attributed to the Hinman documents. These documents could potentially influence the ongoing US congressional effort to regulate the cryptocurrency industry, enabling ether to dodge the security designation.
JPMorgan further proposed that Congress could address this by regulating ether similarly to bitcoin (BTC) and overseeing it as a commodity under the Commodity Futures Trading Commission (CFTC). Additionally, the bank noted that a new “other category” could be introduced for ether and other cryptocurrencies that are decentralized enough to avoid being classified as securities.
The Hinman documents, referring to a speech given by William Hinman, former director of the Division of Corporation Finance at the SEC, have played a crucial role in providing guidance on whether specific crypto assets are securities or not. Hinman outlined a framework for cryptocurrency classification based on the Howey test, and these documents have been cited in several legal cases involving cryptocurrencies, most notably in the SEC vs. Ripple case.
The Ripple SEC case revolves around whether the XRP token is a security or a currency and if Ripple conducted an unregistered securities offering with it. As the importance of the Hinman documents becomes more apparent, the outcome of the SEC vs. Ripple case could significantly impact the cryptocurrency industry’s future, specifically for ether and other decentralized tokens.
Source: Cryptonews
