Newly released court filings have shed light on the belief of the U.S. Securities and Exchange Commission (SEC) and its Chairman, Gary Gensler, that Ethereum (ETH) is an “unregistered security” under what the majority considers the Howey Test. Cryptocurrency advocates say this would be an outdated legal framework for regulating crypto assets.
According to a recent Fox Business report: reportThe details emerged after Ethereum software company ConsenSys filed an unredacted complaint with the SEC.
Is Ethereum an ‘unregistered security’?
According to court filings, SEC Chairman Gensler and the agency appear to have maintained for at least a year the belief that Ethereum violated securities laws by operating as an unregistered security. Federal regulations.
The SEC’s Enforcement Division, led by Gurbir Grewal, began ordering a formal investigation into Ethereum’s status as a security on March 28, 2023. The investigation, known as “Ethereum 2.0,” involved enforcement staff examining purchases and sales by individuals and entities. ETH token.
This would be contradictory if the SEC classified Ethereum as a security. Advance notice Contributed by former SEC Chairman Jay Clayton. In June of last year, Bill Hinman, then director of corporate finance, said that Ethereum and Bitcoin (BTC) are different. respected stock. This announcement led to a 10% increase in the price of ETH.
Additionally, the Commodity Futures Trading Commission (CFTC) airtight ETH, the native token of the Ethereum network, is a commodity subject to that jurisdiction.
Proof-of-stake mechanism at center of regulatory debate
According to the report, the SEC’s investigation into Ethereum was conducted with “unusual secrecy,” requiring recipients of subpoenas to sign confidentiality agreements.
Although the motivation for this secrecy is unclear, Ethereum’s impact on the cryptocurrency market could be significant. market capitalization Nearly $400 billion is considered marketable securities.
Even before his testimony, Gensler’s reluctance to provide definitive answers about Ethereum’s regulatory status had raised concerns within the cryptocurrency industry.
Some have speculated that Ethereum’s switch to a “proof of stake” consensus mechanism in September 2022, in which validators stake their Ethereum holdings, has become more similar to security than the original “proof of work” mechanism used by Bitcoin. Gensler hinted at this concept when he suggested that proof-of-stake tokens could trigger the Howey test.
ConsenSys Acquires SEC
As a Bitcoinist reportedSoftware company ConsenSys has filed a lawsuit against the SEC, alleging an “unlawful” power grab in its attempt to classify ETH as a security.
ConsenSys’ lawsuit against the SEC provides additional insight into the ongoing investigation. Over the past year, the SEC has requested several documents seeking more information about ConsenSys’ role in the transition to proof-of-stake and the acquisition, holding, and sale of ETH.
A report from Fox Business suggests that the SEC may also consider selling ETH before. absorptionIt is considered a potential security dating back to 2018.
The investigation has intensified in recent weeks as ConsenSys received additional document subpoenas and Wells notices indicating the SEC intends to take enforcement action against the company for allegedly acting as an unregistered broker-dealer offering unregistered securities, including ETH. It is done. Metamask Wallet.
ETH is trading at $3,170, down more than 4% in the last 24 hours alone, after several failed attempts to consolidate above the $3,200 price level.
Featured image from Shutterstock, chart from TradingView.com