- Analysts at JPMorgan believe that the recently released Hinman documents will benefit Ethereum in the long run.
- The financial institution states that the documents would see other altcoins become more like Ethereum to dodge the regulator’s hammer.
- The price of altcoins has taken a major hit, with many top assets losing up to 20% since the recent regulatory push by the SEC.
The Securities and Exchange Commission (SEC) lawsuit against Ripple may have ripple effects on the entire market before the final determination of the case.
The release of the documents associated with popular former SEC director William Hinman has been described as a turning point in the case for SEC. Still, right now, it could affect other assets, with Ethereum standing as the biggest gainer. Experts at JPMorgan have stated in a recent report that the released documents will trigger a more decentralized market with Ethereum used as a model.
The whole controversy was sparked via an email from Hinman in 2018 which stated that ether was not a security. According to the report, top figures at the SEC did not regard ether as a security in 2018, as they noted that the “fact that tokens on a sufficiently decentralized network are no longer securities creates a regulatory gap.”
Analysts led by Nikolaos Panigirtzoglou wrote that the Howey Test was used to draw up those conclusions by the Commission. The hallmark of the Howey Test is that an asset will be classified as a security if there is an investment capital in a common enterprise with the reasonable expectation of profits.
“The speech acknowledges that there is another category. It is not a security because there is no controlling group yet there may be a need for regulation to protect purchasers.” Panigirtzoglou commented on the Commission’s position.
New regulation is long overdue
The report by the Wall Street giant points to the fact that a new regulation is needed to balance the regulatory uncertainty opened by the Hinman documents. The Commission’s stance explains why it has not charged Ethereum while going after several altcoins 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,” JP Morgan wrote.
According to the firm, a new category could be created, which will comprise Ethereum and other altcoins that are decentralized to a certain level to avoid being termed securities. Alternatively, Congress can step in and categorize Ethereum with Bitcoin, which the Commission’s chairman Gary Gensler has hinted is not a security. This will place Ethereum and Bitcoin under the oversight jurisdiction of the Commodity Futures Trading Commission (CFTC).