Former SEC Counsel Explains: Ethereum – Security or Commodity?

Former SEC Counsel Explains: Ethereum - Security or Commodity?


Dan Berkovitz discusses the regulatory implications of Ethereum, including the debate over whether it should be classified as a security or a commodity, and who has regulatory control over it, in the latest episode of Laura Shin’s Unchained podcast.

Dan Berkovitz, a previous counsel at the Securities and Exchange Commission, discussed plenty of whole lot of regulatory implications of Ethereum (ETH) in the most up-to-date episode of Laura Shin’s Unchained podcast.

Reports by Berkovitz, one digital currency may exhibit traits of both a security and a commodity.

Ethereum (ETH) Classification Up to CFTC or SEC?

Ethereum’s security debate centers on the confusion caused by the Commodity Futures Trading Commission (CFTC). The agency has classified virtual currencies like Bitcoin (BTC) and Ethereum (ETH) as commodities. Contrarily, the Securities and Exchange Commission (SEC) has not taken a clear position on Ethereum (ETH). It has stated Bitcoin (BTC) is the only digital currency that can potentially be classified as a commodity.

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Berkovitz explained that people often think of commodities colloquially as tangible goods. On the other hand, he touched upon the Commodity Exchange Act to clarify that. A commodity is reportedly defined as something that can be the subject of a futures contract. He stated, “The two statements that ether is a commodity and it may or may not be a security or any virtual currency is a security fact that something could be a commodity and something security are not contradictory.”

The ex-official concurred that the CFTC could enforce anti-fraud and anti-manipulation regulations for commodities. Reports by Berkovitz, the SEC has regulatory control over securities. Adding that if anything is considered a security, the SEC will have regulatory authority over it.

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In the past, Gensler likewise spoke on Ethereum’s status following its conversion to proof-of-stake. He noted that some digital currencies allow investors to “stake” their coins. This function may satisfy a key criterion used by courts to determine whether an investment is a security, in what it refers to as the Howey Test.

With its transition, Ethereum (ETH) addressed its energy use issue but opened a new Pandora’s Box in regard to its classification as a security or commodity.

Ethereum (ETH) Remains Crucial for Legislation

Questions concerning Ethereum’s status have likewise arisen owing to the continuing legal fight betwixt Ripple Labs and the SEC. John Deaton, a digital currency attorney representing XRP Ripple (XRP) holders, has frequently claimed that if XRP Ripple (XRP) is a security, Ethereum (ETH) must be too.

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Deaton recently questioned where Ethereum (ETH) and its competitors were registered. Suggesting that they were subject to different legal scrutiny from the SEC than XRP.

Meanwhile,  BeInCrypto recently informed on internal SEC communications that appeared to show the agency was aware that XRP Ripple (XRP) did not entirely fit the criteria of safety.

And once Castle Island Ventures’ Nic Carter claimed that Ripple had lobbied for Ethereum (ETH) to be dubbed security a year ago, David Schwartz, the chief technology officer of Ripple and the founder of the XRP Ripple (XRP) Ledger, has  stated back then that branding Ethereum security could be “disastrous” for the company. This continues  the debate about Ethereum (ETH) and XRP Ripple (XRP) being securities in the eyes of the agency.

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Regardless of ongoing discussions, the United States persists to be a murky area in categorizing and regulating cryptocurrency investment frameworks. And Ethereum (ETH) suffers an identity crisis.



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