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Hinman document release to intensify competition between Ethereum and altcoins: J.P.Morgan



  • Hinman papers’ release is a boost to Ethereum and could favor decentralization among altcoins. 
  • In a research report, experts at J.P.Morgan say that sufficiently decentralized networks like Ethereum are not securities, creating a regulatory gap. 
  • Experts say that the Hinman documents are likely to influence the direction of US congressional efforts to regulate crypto. 

Hinman papers, the documents that contain internal messages and email communication between the Securities and Exchange Commission’s executives, were released to the public last week. As the crypto community digested the contents of the Hinman release, J.P.Morgan’s strategists published a research report cited by Coindesk explaining how Ethereum and its competitors could benefit from the release.

More cryptocurrencies would be inclined to be “sufficiently decentralized” like Ether and thus escape the SEC’s regulatory crackdown, the analysts say.

Hinman release favors Ethereum and altcoins 

Strategists at J.P.Morgan digested the contents of Hinman papers that were released last week and concluded that the SEC does not consider “sufficiently decentralized” altcoins like Ethereum as securities. This opens up a regulatory gap, meaning that cryptocurrencies that compete with Ethereum are likely to escape the US financial regulator’s clampdown.

The SEC’s senior leadership did not rank Ether as a security in 2018, therefore altcoins that are as decentralized as Ethereum are also likely to qualify as “non-securities.” Nikolaos Panigirtzoglou, lead analyst at J.P.Morgan,  says that the former SEC Director of Corporation Finance’s speech acknowledges that there is another category for crypto assets besides the “securities” label.

A cryptocurrency is not a security if there is no “controlling” group and this implies there is no need for regulators to protect purchases of the asset. The strategist refers to the Howey Test used to determine which transactions qualify as investment contracts and are subject to US securities laws. 

Altcoins could compete to be more like Ether

In the report published on Thursday, J.P.Morgan explains that assets that involve investment of money in a common enterprise and expectation of profits derived from the efforts of others are securities.

This explains why the US regulator refrained from labeling Ethereum as a security. Analysts wrote in their report:

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 other category of tokens, cryptocurrencies that are “sufficiently decentralized” like Ether, are likely to avoid being designated as a security. This intensifies competition between cryptocurrencies and favors Ethereum in the long term.

Assets that were labeled as securities by the SEC suffered a steep decline in their prices in the market-wide sell-off throughout last week. Polygon’s MATIC, Solana (SOL) and Cardano (ADA) wiped out their gains from May as they are among the assets listed as securities.