SEC Investigating Ethereum Foundation’s Dealings
The U.S. Securities and Exchange Commission (SEC) is currently conducting an investigation into the Ethereum Foundation. The regulatory agency has issued a subpoena to gather more information about the foundation and its activities. This move is part of the SEC’s broader review of the regulatory status of Ethereum (ETH) and whether it should be classified as a security.
The SEC’s demands for information cover various aspects of the Ethereum Foundation’s operations, according to Bloomberg. While SEC Chair Gary Gensler has stated that many cryptocurrencies are unregistered securities subject to agency rules, he has not explicitly mentioned whether Ethereum falls into this category.
However, Gensler has suggested that Ethereum’s transition to a proof-of-stake consensus model could potentially bring it under SEC jurisdiction as an “investment contract.” This could have implications for the approval or disapproval of spot Ethereum ETFs.
Coinbase CLO Asserts ETH is a Commodity
In response to the ongoing scrutiny surrounding Ethereum’s regulatory status, Coinbase Chief Legal Officer Paul Grewal defended the cryptocurrency. Grewal emphasized that millions of Americans hold Ethereum, which has been a crucial asset in the crypto market since its launch in 2015. He firmly stated that ETH is a commodity and not a security.
Grewal referred to a statement made by former senior SEC official William Hinman, who confirmed that Ethereum is not considered a security. Additionally, both the Commodity Futures Trading Commission (CFTC) and federal courts have consistently recognized ETH as a commodity. Grewal also highlighted that ETH’s status cannot be determined solely by applying the Howey Test, as there is no ongoing contractual obligation tied to a business enterprise.
Sigh… again with the ETH misinformation as we await a decision on ETH ETPs. Ok–let’s talk about some basic facts about Ethereum. Millions of Americans hold ETH; it has been vital to crypto since its 2015 launch; and ETH is a commodity, not a security. 1/10
— paulgrewal.eth (@iampaulgrewal) March 20, 2024
“The SEC has no good reason to deny the ETH ETP applications,” Grewal concluded. “And we hope they won’t try to invent one by questioning the long-established regulatory status of ETH, which the SEC has repeatedly endorsed. That’s not how the law works. And Americans deserve better.”
Travis Kling, Chief Investment Officer at Ikigai Asset Management, commented that the ongoing scrutiny of Ethereum feels like a coordinated attack on the cryptocurrency.
ETH Prices Recover
Ethereum prices have experienced a recovery following a recent slump. The cryptocurrency saw a 13% bounce back during the Thursday morning Asian trading session, reaching $3,537. This comes after ETH briefly dipped below $3,100 amidst a broader market correction.
Despite the recovery, Ethereum is still down 27.5% from its all-time high in 2021 and 13% from its high of $4,070 in March 2024.
Hot Take: SEC Investigation and Ethereum’s Future
The ongoing SEC investigation into the Ethereum Foundation’s activities and the regulatory status of ETH raises important questions about the future of the cryptocurrency. Here are some key takeaways:
1. Potential Classification as a Security
- The SEC’s review of Ethereum’s regulatory status could potentially lead to its classification as a security.
- Ethereum’s transition to a proof-of-stake consensus model may bring it under SEC jurisdiction as an “investment contract.”
- This classification could impact the approval or disapproval of spot Ethereum ETFs.
2. Coinbase CLO’s Defense
- Coinbase Chief Legal Officer Paul Grewal has firmly asserted that ETH is a commodity, not a security.
- Grewal cited previous statements from SEC officials and recognized bodies that have confirmed ETH’s commodity status.
- He believes that the SEC should not question the long-established regulatory status of ETH.
3. Market Impact
- The ongoing scrutiny from the SEC has caused concern among investors and industry professionals.
- The recovery in Ethereum prices indicates that market participants still have confidence in the cryptocurrency.
- However, the volatility and uncertainty surrounding regulatory decisions may continue to affect ETH’s performance.
As the SEC investigation unfolds, it remains to be seen how Ethereum’s regulatory status will be determined and what impact it will have on the broader cryptocurrency market.
Sources:
Bloomberg
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