Dan Berkovitz, a previous counsel at the Securities and Exchange Commission, discussed plentyย of wholeย lotย of regulatory implications of Ethereumย (ETH) in the most up-to-date episode of Laura Shinโs Unchained podcast.
Reportsย by Berkovitz, one digitalย currency may exhibit traits of both a security and a commodity.
Ethereumย (ETH) Classification Up to CFTC or SEC?
Ethereumโs security debate centers on the confusion caused by the Commodity Futures Trading Commission (CFTC). The agency has classified virtual currencies like Bitcoinย (BTC) and Ethereumย (ETH) as commodities. Contrarily, the Securities and Exchange Commission (SEC) has not taken a clear position on Ethereumย (ETH). It has stated Bitcoinย (BTC) is the only digitalย currency that canย potentially be classified as a commodity.
Berkovitzย explainedย that people often think of commodities colloquially as tangible goods. Onย theย otherย 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, โThe 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 couldย be a commodity and something security are not contradictory.โ
The ex-official concurred that the CFTC could enforce anti-fraud and anti-manipulation regulations for commodities. Reportsย 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.
In the past, Gensler likewise spoke on Ethereumโs status following its conversion to proof-of-stake. He notedย that some digitalย currencies allow investors to โstakeโ their coins. Thisย 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, Ethereumย (ETH) addressed its energy use issue but opened a new Pandoraโs Box in regard to its classification as a security or commodity.
Ethereumย (ETH) Remains Crucial for Legislation
Questionsย concerning Ethereumโs status have likewise arisen owingย to the continuing legal fight betwixt Ripple Labs and the SEC. John Deaton, a digitalย currency attorney representing XRPย Rippleย (XRP) holders, has frequently claimedย that if XRPย Rippleย (XRP) is a security, Ethereumย (ETH) must be too.
Deaton recently questioned where Ethereumย (ETH) and its competitors were registered. Suggesting that they were subject to differentย legal scrutiny from the SEC than XRP.
Meanwhile,ย BeInCrypto recently informed on internal SEC communications that appeared to show theย agency was aware that XRPย Rippleย (XRP) did not entirely fit theย criteria ofย safety.
Andย once Castle Island Venturesโ Nic Carterย claimed that Ripple had lobbied for Ethereumย (ETH) to be dubbed security aย yearย ago, David Schwartz, the chief technology officer of Ripple and the founder of the XRPย Rippleย (XRP) Ledger, hasย stated backย then that branding Ethereumย security couldย be โdisastrousโ for the company. This continuesย the debate about Ethereumย (ETH) and XRPย Rippleย (XRP) being securities in the eyes of the agency.
Regardlessย of ongoing discussions, the Unitedย States persistsย to be a murky area in categorizing and regulating cryptocurrency investment frameworks. And Ethereumย (ETH) suffers an identity crisis.
