Newly disclosed court documents have shed light on the belief of the US Securities and Exchange Commission (SEC) and its chairman, Gary Gensler, that ethereum (eth) is an “unregistered security” based on the Howey, which is considered by the vast majority. from cryptocurrency advocates is an outdated legal framework to regulate cryptoassets.
According to a recent Fox Business report ethereum-was-security-for-at-least-year” target=”_blank” rel=”noopener nofollow”>reportThe details emerged after ethereum software company ConsenSys filed an unredacted complaint against the SEC.
Is ethereum an 'unregistered security'?
According to court documents, SEC Chairman Gensler and the agency appear to have believed for at least a year that ethereum was operating as an unregistered security, thus violating federal regulations.
The SEC Enforcement Division, led by Gurbir Grewal, initiated a formal investigative order into the status of ethereum as a security on March 28, 2023. This investigation, known as “ethereum 2.0,” involved enforcement personnel investigating to individuals and entities that bought and sold. eth tokens.
If the SEC were to classify ethereum as a security, it would contradict prior orientation provided under former SEC Chairman Jay Clayton. In June of the previous year, then-Chief Corporate Finance Officer Bill Hinman declared that ethereum and bitcoin (btc) were not considered a guarantee. This announcement caused a 10% increase in the price of eth.
Additionally, the Commodity Futures Trading Commission (CFTC) classified eth, the native token of the ethereum network, as a commodity under its jurisdiction.
Proof-of-stake mechanism at the center of regulatory debate
According to the report, the SEC's investigation into ethereum was conducted with “unusual secrecy,” and recipients of the subpoenas were required to sign confidentiality agreements.
The reason behind this secrecy is still unclear, but the implications for the cryptocurrency market could be substantial if ethereum, with its Market cover of almost 400 billion dollars, is considered a value.
Even before his testimony, Chairman Gensler's reluctance to provide a definitive answer on ethereum's regulatory status raised concerns within the crypto industry.
Some speculated that ethereum's transition to a “proof-of-stake” consensus mechanism in September 2022, where validators stake their ethereum holdings, made it look more like a security than the original “proof-of-work” mechanism. used by bitcoin. Gensler alluded to this notion, suggesting that proof-of-stake tokens could trigger Howey's proof.
ConsenSys faces off against the SEC
As a bitcoinist reportedSoftware company ConsenSys filed a lawsuit against the SEC, accusing the agency of an “illegal” power grab by attempting to classify eth as a security.
ConsenSys' lawsuit against the SEC provides more information about the ongoing investigation. Over the past year, the SEC has made multiple document requests, seeking detailed information about ConsenSys' role in the transition to proof-of-stake and its acquisitions, holdings, and sales of eth.
The Fox Business report further suggests that the SEC may also consider eth sales sooner The fusiondating back to 2018, as potential values.
The investigation has intensified in recent weeks, with ConsenSys receiving subpoenas for additional documents and a notice from Wells indicating the SEC's intent to take enforcement action against the company for allegedly acting as an unregistered broker-dealer offering unregistered securities. registered, including eth, through its MetaMask wallet.
eth is trading at $3,170, a drop of over 4% in the last 24 hours alone, after several failed attempts to consolidate above the $3,200 price level.
Featured image from Shutterstock, chart from TradingView.com