Dan Bergin
This latest cryptocurrency regulation could change the way the cryptocurrency industry works.
Read U.TODAY
google news
what is happening
The SEC has stepped up its efforts to classify Ethereum as a security and has issued subpoenas to companies involved in the Ethereum Foundation. Following the SEC's recent approval of a Bitcoin ETF, this move calls into question the approval of an Ethereum ETF.
If Ethereum is classified as a security, it could face strict trading regulations. This may require increased red tape and restrictions on buying and selling Ethereum for retail traders in the United States. Additionally, companies involved in Ethereum will have to follow regulations similar to those governing stocks and bonds, which can complicate their operations.
Despite previous statements hinting at Ethereum's commodity status, Ethereum will move to a proof-of-stake model in 2022, prompting SEC scrutiny. The findings could affect the regulatory status of Ethereum and the approval process for Ether ETFs, increasing uncertainty in the crypto industry.
The SEC investigation into Ethereum has subpoenaed companies to produce documents and financial records related to their interactions with the Ethereum Foundation, which is responsible for managing and developing the Ethereum blockchain.
The investigation gained momentum after Ethereum transitioned to a “proof of stake” governance model in September 2022, leading the SEC to reconsider Ethereum’s classification as a security. This shift away from Bitcoin's energy-intensive model provided a new pretext for SEC oversight.
SEC's position
Under the leadership of Gary Gensler, the SEC has signaled a broader regulatory approach to cryptocurrencies, particularly those utilizing proof-of-stake models. However, the Commodity Futures Trading Commission's (CFTC) approval of an ETF to track Ethereum's ether futures has made that regulatory situation even more complex.
Despite the CFTC considering Ether as a commodity, the SEC's investigation into Ethereum's security status has led to speculation and uncertainty within the cryptocurrency industry. The possibility of declaring Ethereum as a security could further complicate the approval process for Ether ETFs and call into question the CFTC's oversight of the Ether futures market.
Gensler suggested that Ethereum's move to a “proof-of-stake” mechanism, where coin owners earn rewards for staking their assets, could make it subject to securities regulation. This change from the previous “proof of work” method used by Ethereum was similar to a major change in the way blockchains operate.
why is it important
Ethereum's legal status has long been ambiguous, but recent developments suggest the SEC is pushing to classify Ethereum as a security. This is in contrast to previous statements indicating that Ethereum is more like a commodity than a security. On March 22, the SEC extended the deadline for a decision on Grayscale's Ethereum Futures Trust ETF to May 30.
If Ethereum were classified as a security, it could face stricter trading regulations, which could pose challenges for investors and exchanges. The delisting of Ethereum from exchanges and its impact on projects built on the blockchain is a major concern. It is impractical to use registered securities for everyday transactions, such as paying for gas.
Crypto industry reaction
Ripple CEO Brad Garlinghouse believes the SEC will lose:
Coinbase CLO Paul Grewal pointed out that ETH's status as a commodity has been established for a long time.
About the author
Dan Bergin
