Analysts at Wall Street giant JPMorgan Chase & Co. believe the release of the Hinman documents will make altcoins as decentralized as Ethereum (ETH) to avoid regulatory hurdles, a study reports. the book revealed. coin desk.
The Hinman documents were made public on June 12 as part of Ripple’s defense against the SEC lawsuit. They shed some light on why regulators have designated some cryptocurrencies as securities in their complaints against Coinbase and Binance.US, while delisting others such as Ethereum. .
JP Morgan analysts, led by managing director Nikolaos Panigirtzoglou, studied the documents and wrote that their release bodes well for the decentralization of Ethereum and the crypto industry as a whole.
Analysts added that the contents of the document are likely to “impact Congress’ efforts to regulate the cryptocurrency industry” in a way that Ethereum is not considered a security.
Lenders therefore believe that altcoins will likely be forced to mimic Ethereum and its nature, increasing competition among altcoins.
According to the lender:
“[The] The more decentralized a cryptocurrency is, the more likely it is to avoid being designated as a security. “
More recently, most regulators around the world have come to accept the idea that Bitcoin is likely to be a commodity due to its nature and origin. The US intends to bring bitcoin under CFTC jurisdiction along with other commodities.
However, there was a distinct lack of clarity about altcoins and whether they should be considered securities. Especially in the U.S., the SEC has been adamant that almost all cryptocurrencies are securities, but until recently it only really pursued Ripple in a legal battle.
A watchdog complaint against two major cryptocurrency exchanges in early June cemented the position that some of the biggest cryptocurrencies such as Solana, Cardano and Polygon are actually securities under the Howie test. .
Meanwhile, the Hinman document said SEC senior officials did not consider Ethereum to be a security in 2018 because the cryptocurrency lacked a “governing group” and the network was “well decentralized.” It is shown.
On the other hand, the SEC said that cryptocurrencies like Solana and Cardano have a dominant group subject to the Howie test, and that buyers had a “reasonable expectation” that they would benefit from their investment. It claims to be classified as an investment contract.
JP Morgan said the Hinman document also indicates that the SEC acknowledges that there are regulatory gaps in the current regime if ether cannot be classified as a security.
This means that new laws and regulations are needed to properly regulate the industry and ensure consumer protection, as cryptocurrencies are still a problem even if they are not securities.
JP Morgan believes the easiest approach for Congress is to classify Ethereum and other cryptocurrencies that pass the standard as commodities and regulate them under the CFTC in the same way Bitcoin is.
Another option would be to create an entirely new “Other” category for altcoins that don’t fit under a securities umbrella.