The US Congress may place ethereum (ETH) in a new category with less onerous regulations than securities or bundle it with bitcoin (BTC) as a commodity, JPMorgan strategists suggest. The theory comes after ongoing SEC debates over the nature of Ethereum as a security.
As debates over crypto regulations persist, ethereum finds itself at a regulatory crossroads.
The block reported that a new prediction from JPMorgan strategists, led by Nikolaos Panigirtzoglou, suggests that Congress could classify ethereum differently than its current state.
Instead of being tagged along with bitcoin as a commodity, Ethereum could land in a new ‘other category’, potentially with fewer regulatory burdens than securities.
Understanding the ‘Hinman Documents’
The concept of “other category” originates from Hinman documents recently disclosed in an ongoing SEC enforcement lawsuit against Ripple Labs.
The documents date back to a 2018 speech by Bill Hinman, the then-head of the SEC’s Division of Corporate Finance, arguing that Ethereum was not a security due to its “sufficiently decentralized” nature.
However, these documents also reveal particular concerns raised by some SEC officials, noting that classifying tokens on a sufficiently decentralized network as non-securities could create a regulatory loophole. The “other category” was first mentioned as a possible solution.
Interestingly, SEC Chairman Gary Gensler has refrained from clearly stating whether he considers the safety of ether.
His previous statements suggest that all cryptocurrencies besides bitcoin could be considered securities, however he has not directly addressed the state of ethereum following the release of the ‘Hinman documents’.
Potential impact on ethereum
JPMorgan strategists suggest that the Hinman documents could strengthen ethereum’s argument against being labeled a security. However, they note that this will not directly affect Ripple, which is currently involved in a lawsuit with the SEC.
However, if Ripple successfully argues that they did not receive fair notice about its classification as a security, it could affect future SEC enforcement actions. Other crypto entities could use this precedent to argue that they did not receive fair notice.
