Crypto Trade Group Pressures SEC to Exempt Ethereum From Security Classification

An alliance of lawyers, venture capitalists, and entrepreneurs have recently met with the US Securities and Exchange Commission to petition for the creation of cryptocurrency "Safe harbors" for specific cryptocurrencies and tokens, including Ethereum.

The Venture Capital Working Group, which includes representatives of Silicon Valley venture firms Union Square Ventures and Andreessen Horowitz, met with the SEC on the 28th of March to lobby against the regulatory body classifying all cryptocurrencies as securities, which would place them under a high level of regulatory scrutiny.

The SEC has recently taken a firm stance toward cryptocurrencies, with Securities and Exchange Commission chairman Jay Clayton staring at a US Senate hearing in February that "Every ICO" he's seen thus far qualifies as a security.

As a number of high market cap cryptocurrencies - including Ethereum - have been launched via initial coin offerings, the possibility that the SEC intends to regulate them as securities is extremely concerning to the blockchain community.

Venture Capital Alliances Pushes Against SEC. The Venture Capital Working Group, in response to the SEC's rigid stance on cryptocurrencies, have proposed that the SEC establish a "Safe harbor" for select cryptocurrencies, classifying them as "Utility tokens" as opposed to highly-regulated securities.

The specifics of the meeting between the Venture Capital Working Group and the SEC are currently confidential, but the group has announced that the group is working reverently to guarantee the classification of specific tokens as utility tokens.

Any investment defined as a security under SEC regulations must be registered via a lengthy paperwork and auditing process, and can only be traded on regulated exchanges such as those where traditional stocks and securities are traded.

While cryptocurrencies such as Bitcoin, which was never launched through a centralized organization, may be completely exempt from classification as a security, other high market cap cryptocurrencies such as Ethereum could fall under the scope of new regulatory rulings that target tokens launched via initial coin offerings - an eventuality that could throw the cryptocurrency market into disarray.

According to the industry group, cryptocurrencies should be exempt from securities laws should they become "Fully decentralized," a definition that includes the eventuality in which a "Token creator no longer has control of the network based on its ability to make unilateral changes to the functionality of the tokens."

While the SEC has yet to release an official statement regarding the outcome of the meeting, the presence of a trade group consisting of significant venture capital firms arguing in favor of a more nuanced approach to cryptocurrency regulation speaks volumes about the rapidly shifting perception of cryptocurrencies within the institutional capital ecosystem.