SEC Official Defends 'Balanced' ICO Oversight in Congress

The remarks from Rep. Brad Sherman came as William Hinman, the director of the Securities and Exchange Commission's Division of Corporation Finance, was speaking before the House Financial Services Committee's Capital Markets, Securities, and Investment Subcommittee.

Hinman, in turn, pushed back by saying: "Some folks are finding that the ICO instrument allows for a different type of enterprise, one that's more decentralized, and which they think has some value."

During his opening remarks, Sherman struck a critical tone toward bitcoin in particular, remarking that "Bitcoin is a security in that it is an investment."

It's a notable comment, given that it's one that the SEC is unlikely to agree with - Hinman's boss, SEC chairman Jay Clayton, suggested in November that while ICO tokens likely qualify as securities, bitcoin does not.

Speaking to CoinDesk Friday, Digital Asset Research senior analyst and counsel Matt Gertler said bitcoin does not meet the Supreme Court's definition of a security.

The lawmaker asked Hinman at Friday's hearing if there were circumstances in which a token sale would be "Something other than a securities offering."

"It's quite hard to have an initial sale without having a securities offering," Hinman replied, "Which is why the chairman has noted that the initial sale of these may require compliance or exemptions."

Emmer then asked about utility tokens, which ICO proponents argue should not be regulated as securities because they are designed to facilitate the usage of a blockchain-based network, rather than act as investments.

Hinman went on to suggest that the SEC would take a token's circumstances into account, "Especially if it's a decentralized network."

"The issues around whether a particular coin offering may be a security are somewhat complex," Hinman told committee chairman Rep. Bill Huizenga.