SEC Chairman Warns Ethereum Update Could Classify ETH as a Security

Following the recent long-awaited update to the Ethereum network – which saw the network move from proof-of-work to proof-of-stake – SEC Chairman Gary Gensler spoke out about the change, hinting that it might be enough to push Ethereum out of its current legislative bracket and into that of securities.

Post-Update ETH May Pass the Howey Test

The Howey Test – named after a landmark 1946 case that helped determine what is considered a security and what is not – states that a transaction becomes an investment contract if money is “invested in a common enterprise with a reasonable expectation of profit to be derived from the efforts of others.”

If a transaction passes the Howey Test, it is considered an investment contract and needs to be registered with the SEC.

While ETH’s value was based on proof-of-work, Ethereum was not considered a security – a point of contention often brought up by Ripple in their own legal battle against the SEC.

However, now that the value of ETH is derived from proof-of-stake (PoS), staking, which has the staker make his own tokens unavailable to himself for a period of time in exchange for a return on investment, could be seen as a “reasonable expectation of profit.”

SEC Chairman States No Cryptocurrency Is Being Singled Out

Addressing the Senate Banking Committee, which oversees his institution, SEC Chairman Gary Gensler indicated that staking may be officially considered an investment. This would place the coin as staked under the purview of the SEC – not the Commodity Futures Trading Commission (CFTC), which often regulates cryptocurrencies in the US as digital commodities.

“From the coin’s perspective…that’s another indicia that under the Howey test, the investing public is anticipating profits based on the efforts of others. It looks very similar – with some changes of labelling – to lending.”

The SEC has made it clear that crypto platforms offering lending services must register with it in order to operate legally. Meanwhile, in the case of digital commodities without these services, a bill is currently being scrutinized for approval by the US Senate, which would grant the CFTC extended powers when it comes to regulating cryptocurrencies.

However, critics argue that, unlike the SEC, the CFTC is unable to properly regulate such a large market, at least with its current resources.

The post SEC Chairman Warns Ethereum Update Could Classify ETH as a Security appeared first on CryptoPotato.

Related Posts

High Profile NFT Collection Moved from 3AC Wallet Amid Bankruptcy Proceedings

Last year, a non-fungible token (NFT) fund created by Three Arrows Capital co-founders has now seen many of its digital art assets moved to another wallet. On…

AI Music: Bots Can Now Write Songs, and Produced a New Kurt Cobain Hit

AI Music is now part of the cultural landscape, whether we like it or not. Artificial Intelligence (AI) can now write lyrics, music and even produce a…

Insolvency not in ‘Nexo’s reality,’ says co-founder during AMA

Co-founder Kalin Metodiev stated that comparisons between Celsius, Voyager and Nexo are “very far from reality” and that the firm is focused on building in a sustainable…

Ethereum Name Service: Here Are the 5 Most Expensive ENS Domains

Ethereum Name Service (ENS) domains have seen a sharp rise in interest over the last six months. New registrations hit 437,000 in September alone. On secondary markets…

Anchorage co-founder sees ‘tons of opportunity’ as it expands into Asia

Anchorage Digital has marked its plans for expansion into the Asian crypto market, with co-founder Diogo Mónica noting that Singapore is just a starting point. Anchorage Digital…

Federal regulators are preparing to pass judgment on Ethereum

The Securities and Exchange Commission is moving to take action against Ethereum that reaches far beyond America’s borders. Are regulators with the U.S. Securities and Exchange Commission…

Generated by Feedzy