Jack Dorsey, former CEO of Twitter, while answering to a June 6 comment, he alleged that Ethereum (ETH), the world’s second-largest cryptocurrency exchange, is a security under United States law.
This controversially implies that ETH holders must, as provided by law, abide by rules imposed by the Securities and Exchange Commission (SEC).
Dorsey affirms that Ethereum is a security
Dorsey, a well-known Bitcoin supporter and CEO of Square Inc, a financial services company that owns Cash App, has spoken about the underlying technology of BTC.
In his assessment, Dorsey believes that Bitcoin can change the way money is exchanged.
In the midst of this, Bitcoin, as a network and payment solution, can help create a more equitable financial system.
Square is already invested in Bitcoin. On the other hand, Cash App continues to process billions in BTC transactions.
SEC and Commodity Futures Trading Commission (CFTC) officials have said that BTC, the native currency of the Bitcoin network, is a commodity and not an investment contract.
The SEC and CFTC are two of the main regulators in the United States tasked with regulating the securities and derivatives markets.
However, considering their broad scopes, their jurisdictions may overlap. Still, its endorsement of Bitcoin as a commodity may further drive adoption and increase liquidity.
Dorsey’s statement comes as a regulatory storm in recent days threatens to draw ETH into the mix for a number of reasons.
SEC Chairman Gary Gensler during a congressional hearing in early February. specified that tokens like Ethereum are sold as investments and subsequently generate profit solely from the efforts of others.
Therefore, in the perception of the agency, it may be an investment contract or a security subject to federal securities law.
Still, he added, the commission was reviewing crypto markets, including those for Bitcoin and Ethereum, to ensure they are efficient and fair.
While before the House Financial Services Committee in mid-April, Gensler also did not clarify whether ETH was a security or a commodity.
ETH remains sensitive to regulatory developments
The SEC has initiated enforcement actions against several companies that mint tokens on the Ethereum platform.
The SEC has also accused top influencers of promoting tokens that they claim are registered securities.
Despite this, the SEC has yet to issue an official statement regarding the classification of this cryptocurrency. In the end, the commission could choose not to regulate ETH as a security after having reviewed all the relevant factors.
With the regulator calling tokens from competing smart contract platforms like Cardano and Algorand as securities, ETH prices sold off on June 5 only to reverse today’s losses.
Whether the June 5 dump was an overreaction from the crypto market remains to be seen.
What is clear is that ETH remains sensitive to regulatory actions, and bulls have failed to break above the 2023 highs of $2,100 since then.
Featured Image from Canva, Chart from TradingView
