The regulatory status of Ethereum (ETH) is back in the spotlight after the US Securities and Exchange Commission (SEC) reportedly subpoenaed information from companies regarding their dealings with the Ethereum Foundation. This move is part of a broader review to determine if ETH should be classified as a security.
SEC Seeks Answers, But Remains Tight-Lipped
According to Bloomberg, the SEC subpoena delves into various aspects of the Ethereum Foundation’s operations. While SEC Chair Gary Gensler has previously stated his belief that many crypto assets fall under the agency’s purview as unregistered securities, he has remained tight-lipped on Ethereum’s specific standing.
However, Gensler has hinted that Ethereum’s recent switch to a proof-of-stake consensus model could potentially bring it under SEC jurisdiction as an “investment contract.” This shift could also be seen as a way for the SEC to justify its past disapproval of spot Ethereum ETFs (Exchange Traded Funds).
Coinbase Pushes Back on Security Classification
The SEC’s actions have drawn criticism from industry players. On March 21st, Coinbase Chief Legal Officer Paul Grewal expressed frustration, stating the “misinformation” surrounding ETH and the ongoing wait for a decision on ETH ETPs. He emphasized that millions of Americans hold Ethereum, a crucial element of the crypto ecosystem since its 2015 launch, and reiterated his stance that ETH is a commodity, not a security.
Grewal further bolstered his argument by citing a statement from former SEC official William Hinman classifying ETH as a non-security. Additionally, he highlighted how the Commodity Futures Trading Commission (CFTC) and federal courts have consistently recognized ETH as a commodity.
Also Read: Ethereum Eyes Decentralized Future with Vitalik Buterin’s “Rainbow Staking”
Howey Test and Coordinated Attack?
Grewal further argues that the Howey Test, used to determine if an asset is a security, is inapplicable to ETH. He claims the test’s requirement of an ongoing contractual obligation tied to a business enterprise doesn’t fit the Ethereum model. This sentiment is echoed by Travis Kling, Chief Investment Officer at Ikigai Asset Management, who views the SEC’s actions as a “coordinated attack on ETH.”
Ethereum Prices Recover, But Uncertainty Lingers
The recent SEC scrutiny sent shivers down the crypto market’s spine, causing ETH prices to dip below $3,100 on March 20th. However, a broader market recovery has seen ETH bounce back by 13%, reaching $3,537 during Thursday’s Asian trading session.
Despite the rebound, Ethereum remains significantly below its 2021 peak ($4,891) and its 2024 high of $4,070 (March 12th). The cloud of regulatory uncertainty surrounding ETH’s classification is likely to continue impacting its price in the near future.
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