Five years ago William Hinman, the head of the United States Securities and Exchange Commission (SEC), delivered a speech that left regulatory loopholes and created confusion in the cryptocurrency industry. This was revealed in a series of documents presented today in the midst of the legal dispute between Ripple and the regulatory agency.
The company issuing the XRP token has been in a legal dispute since the end of 2020 and today, in a new chapter, questions the lawsuit that the SEC charged against Ripple Labs and its founders.
The SEC considers XRP to be an unregistered security and Ripple, for its part, maintains that it is a virtual currency. And the CEO of the company, Brad Garlinghouse criticism for the regulator to go this far”when his own division head deliberately created so much confusion“
The documents themselves shared by Ripple’s legal team reveal behind the scenes of a speech Hinman gave on June 14, 2018. At that time, a debate was taking place in relation to his own confusion regarding regulatory aspects.
The debate was recorded in emails and drafts that are now public. And in which Hinman came to declare that did not see the “need to regulate ether (ETH from Ethereum) as a security“. He then added that he would call Vitalik Buterin later that week to confirm “our understanding.”
Hinman ignored recommendations from his legal team
Subsequently, staff from the SEC’s legal office expressed reservations about directly referring to ether in the speech. In this regard, they point out that doing so would make it difficult for the agency to later change its position on ETH.
Despite the recommendation, Hinman decided that, even so, the native crypto asset of the Ethereum network would remain cited, as an example in his speech, about what a security is not.
Hinman also stated that “a token is not a security once it becomes decentralized enough.” And while he was warned about the erratic approach of his, the speech later became guidance that was promoted by the SEC as well.
Now, the disclosed SEC documents could have a significant influence on the current controversy involving Ripple Labs and the regulatory agency.
They could even have implications for other cases such as recent lawsuits filed against Binance and Coinbase, the cryptocurrency exchanges that were accused, last week of trading unregistered securities, as reported by CriptoNoticias.