The security versus non-security debate has been going on in the United States for years now. When Ripple faced a lawsuit in 2020, almost everyone had an opinion on the rankings. This topic has once again become a major point of controversy, due to the agency’s latest legal action against Binance and Coinbase. Now, according to JPMorgan analysts, Ethereum could be placed in a new “other” category by US lawmakers. This would prevent the asset from being identified as a security and, in turn, protect investors. Strategists at the investment bank, led by Nikolaos Panigirtzoglou, reportedly wrote in a recent note:
It is “possible that a new “other category” will be introduced, specific to Ethereum and other cryptocurrencies that are cryptocurrencies decentralized enough to avoid being designated as securities. This “other category” would involve more restrictions and protections for investors than those currently contemplated for commodities, but less onerous than those required for securities.
The “Hinman” factor
The “Hinman” documents relating to the SEC-Ripple affair were recently released. The internal emails Written by the SEC’s former Director of Corporate Finance in 2018, he emphasized that he did not see the need to regulate ETH as a security. This echoed his infamous speech of the same year. At the time, William Hinman called ETH insecure. Indeed, it was based on a “sufficiently decentralized” blockchain network.
Stuart Alderoty underlines how Hinman ignored multiple warnings that his speech contained fabricated analysis with no legal basis. Ripple’s chief legal officer said Hinman’s claims broke with the Howey Factors and exposed regulatory shortcomings. He stressed that this would not only create confusion, but “greater confusion” in the market.
According to JPMorgan strategists, the release of the Hinman documents could perhaps explain why the SEC has avoided taking action against Ether. On the other hand, the regulator has recently flagged almost all other major tokens. In the Binance case, BNB, BUSD, SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS and COTI were victims. In the Coinbase lawsuit, the SEC specifically considered SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO to be securities.
Nevertheless, according to JPMorgan strategists, the publication of the documents will benefit Ethereum. The documents “strengthen Ethereum’s case to avoid being designated as a security.” However, they believe that “this does not necessarily have direct implications for Ripple.”