In a development that could have far-reaching implications on the cryptocurrency market, the release of the Hinman documents in the ongoing Securities and Exchange Commission (SEC) lawsuit against Ripple has provided a significant boost to Ether (ETH), according to a research report by JPMorgan released last Thursday.
The report details the implications of the publicized emails related to William Hinman’s 2018 speech, former Director of Corporation Finance at the SEC, in which he argued that Ether did not constitute a security. Ripple published these emails last Tuesday as part of its defense strategy against the SEC lawsuit.
The report further notes that senior leadership at the SEC did not classify Ether as a security in 2018. Moreover, SEC officials acknowledged the regulatory void created by the decentralization of tokens, indicating the need for potential future regulation to protect investors.
JPMorgan’s analysis, spearheaded by Nikolaos Panigirtzoglou, underscored that Ether could potentially avoid being designated as a security due to the lack of a controlling group, referring to the criteria set forth in the Howey Test.
The bank suggests that the release of the Hinman documents could steer U.S. Congressional efforts to regulate cryptocurrencies, thereby enabling Ether to circumvent the security label. A potential solution could be to categorize Ether alongside Bitcoin (BTC) and oversee it as a commodity under the Commodity Futures Trading Commission (CFTC).
Furthermore, JPMorgan hinted at the possibility of introducing a new “other category” specifically for Ether and similar decentralized cryptocurrencies. The bank emphasized that the more decentralized a cryptocurrency is, the higher its chances of avoiding security designation.