In a recent research report, JPMorgan (JPM) highlighted that the release of the Hinman papers by Ripple in the ongoing U.S. Securities and Exchange Commission (SEC) case against the company could have significant implications for the crypto market, media reports said.
The papers, consisting of emails tied to former Director of Corporation Finance William Hinman’s 2018 speech, revealed that senior SEC officials did not consider ether (ETH) as a security at the time.
JPMorgan’s report suggests that this development could lead to a greater push for decentralization in the cryptocurrency space and have a positive impact on ether. The analysts at JPMorgan, led by Nikolaos Panigirtzoglou, noted that the SEC acknowledged the existence of an “other category” during Hinman’s speech, referring to assets that may require regulation to protect purchasers but are not considered securities due to the absence of a controlling group.
The Howey Test, which determines whether an asset qualifies as an investment contract and falls under U.S. securities laws, was also mentioned in the report. JPMorgan pointed out that while ether did not meet the criteria for being classified as a security, the SEC’s pursuit of other crypto tokens this year raised questions about why they had not taken action against ether. The release of the Hinman papers may provide an explanation for this divergence in regulatory treatment.
According to JPMorgan, the Hinman documents could influence the ongoing efforts in the U.S. Congress to regulate the cryptocurrency industry. The report suggests that Congress may opt to categorize ether similarly to bitcoin (BTC) and subject it to oversight by the Commodity Futures Trading Commission (CFTC) as a commodity, thereby avoiding a security designation.
Additionally, the report proposes the introduction of an “other category” specifically for cryptocurrencies like ether that demonstrate a sufficient level of decentralization to evade classification as securities.
The JPMorgan analysts assert that the degree of decentralization in a cryptocurrency plays a significant role in its chances of being designated as a security. Consequently, the release of the Hinman papers is expected to intensify competition among major cryptocurrencies, driving them to pursue greater decentralization and emulate the characteristics of ether.
As the crypto market continues to evolve, the impact of the Hinman papers on regulatory approaches and the classification of cryptocurrencies remains to be seen. The release of these documents has sparked discussions within the industry and is likely to shape the future direction of regulatory frameworks worldwide.
