Hinman Documents Release in SEC-Ripple Case Is a Boost to Ether: JPMorgan

The documents are likely to intensify the move among major cryptocurrencies to become more decentralized and look more like ether, the report said.

AccessTimeIconJun 19, 2023 at 7:52 a.m. UTC

The release of the Hinman papers last week in the U.S. Securities and Exchange Commission’s (SEC) case against Ripple is a boost to ether (ETH), and is likely to trigger a move to more decentralization in the crypto market, JPMorgan (JPM) said in a research report Thursday.

Emails tied to former Director of Corporation Finance William Hinman’s 2018 speech saying ether did not look like a security were published last Tuesday by Ripple in its defense against an SEC lawsuit.

Senior leadership at the SEC did not rank ether as a security in 2018, the report noted, and SEC officials acknowledged that the “fact that tokens on a sufficiently decentralized network are no longer securities creates a regulatory gap.”

“The speech acknowledges that there is an other category,” analysts led by Nikolaos Panigirtzoglou wrote, adding that “it is not a security because there is no controlling group (at least in the Howey sense) yet there may be a need for regulation to protect purchasers.”

Panigirtzoglou was referring to the Howey Test, which is used to determine which transactions qualify as investment contracts and thus subject to U.S. securities laws. An asset can be classed as a security if there is an investment of money in a common enterprise and the expectation of profits derived from the efforts of others.

JPMorgan says these revelations could explain why the regulator has not taken action against ether while targeting other crypto tokens this year.

“The Hinman documents are likely to influence the direction of the current U.S. congressional effort to regulate the crypto industry in a way that ether would avoid being designated as a security,” the analysts wrote.

The easiest solution for Congress would be to put ether in the same category as bitcoin (BTC), and regulate it as a commodity under the oversight of the Commodity Futures Trading Commission (CFTC).

A new “other category” could be introduced specific to ether and other cryptocurrencies that are decentralized enough to avoid being classed as securities, the bank said, adding that the “more decentralized a cryptocurrency is the higher its chance that it would avoid being designated as a security.”

The Hinman documents will probably intensify the race among major cryptocurrencies to become more decentralized and look more like ether, the report said.

Edited by Sheldon Reback.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Author placeholder image

Will Canny is CoinDesk's finance reporter.

Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.