In brief:
The Venture Capital Working Group has requested the US Securities and Exchange Commission to provide a formal assurance that ether is not a security.

Recently, an alliance of lawyers, venture capitalists, and entrepreneurs have requested the US Securities and Exchange Commission to provide a formal assurance that the native currency of the Ethereum platform, ether is not a security.
The Venture Capital Working Group, comprising the representatives of Silicon Valley venture firms Union Square Ventures and Andreessen Horowitz have urged the agency to provide “safe harbors” for particular cryptocurrencies and tokens, including Ethereum.

According to CNN, on March 28 the Venture Capital Working Group in a meeting with top officials of SEC expressed their concerns over the regulatory body classifying all cryptocurrencies as securities. It is to be noted that lately Jay Clayton, Chairman of Securities and Exchange Commission stated that “every ICO” he’s seen thus far qualifies as a security.

Initially, it was reported that the meeting was centered around initial coin offering (ICO) tokens only, however, according to Nathaniel Popper of the New York Times, the second-largest cryptocurrency, Ethereum was also one of the meeting’s agenda.
Ethereum before its launch through an ICO-style presale was bootstrapped, in which the founders raised around USD $18 million in Bitcoin. After it was launched in July 2015, the contributors received ether. Now, the network distributes new coins through mining.

Despite the fact that Ethereum possesses many features of a security under US law, the Venture Capital Working Group in their proposal has asserted that Ethereum “has become so decentralized that it should not be deemed a security.”

According to the proposal, while classifying a token as security, the regulators should consider the concept of decentralization. The proposal states that tokens should not be labeled as securities if they attain “full functionality” or “full decentralization.” This happens “when the token creator no longer has control of the network based on its ability to make unilateral changes to the functionality of the tokens.”

Now, it is to be seen what stance SEC will adopt and will it differentiate between newly launched projects and those that have been functional for years, such as Ethereum. However, broad regulatory exemptions for the industry are highly unlikely.

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