No products in the cart.
- Latest
- Trending
ADVERTISEMENT
Are US Securities and Exchange Commission regulators preparing to dismantle Ethereum? It certainly seems possible given the threats of officials, including SEC Chairman Gary Gensler.
The agency enacted crypto regulation in September. First, at the annual The SEC Speaks conference, officials pledged to continue to take law enforcement action and urged market participants to register their products and services. rice field. Gensler said that to mitigate conflicts of interest and enhance investor protection, cryptocurrency intermediaries should be split into separate legal entities and have their respective functions (exchanges, broker-dealers, custody functions, etc.) registered. I even suggested that there is.
Then came the announcement that the SEC’s Corporate Finance Division plans to add the Virtual Assets Division and the Industrial Applications and Services Division to its Disclosure Review Program this fall to help register cryptocurrency market participants. did. Then there was testimony before various Senate committees on a bill to overhaul crypto regulation. Gensler reiterated his belief that nearly all digital assets are securities, and he implicitly endorsed his view that intermediaries associated with such digital assets should be registered with the SEC. did.
But perhaps the most shocking shot came when the SEC took aim at Ethereum, and former SEC officials took Ethereum to the next level.ethereum), Bitcoin (Bitcoin), was not a security.During testimony before the Senate Banking Committee, Gensler said Ethereums Proof of Stake (PoS) from Proof of Work Ethereum could have been brought under the jurisdiction of the SEC. [is] Expect profits based on the efforts of others.
Related: Biden is hiring 87,000 new IRS agents.
In a subsequent complaint filed against the token promoter, the SEC ethereum blockchain Since more of Ethereum’s nodes are located in the United States than in any other country, it may fall within the jurisdiction of the SEC. These recent positions on Ethereum are clearly SEC overkill and seem to be a stronger threat intended to entice the industry to register.
First, in 2018, then-SEC corporate finance director William Hinman declared that Bitcoin and Ether were not securities in the eyes of the SEC. This seemed to be rooted in both the fact that Ethereum is well-decentralized and the difference between cryptocurrencies (alternatives to sovereign currencies) and digital tokens (assets that revolve around specific ventures). rice field.
However Merging Ethereum into PoS The SEC suggests that Ether may be security under the Howey Test (security if asset is 1), potentially muddling these waters. 2) within a common enterprise; 3) where there is a reasonable expectation of profit; 4) derived from the efforts of others). It is unclear how Merge was able to substantially change the decentralized nature and purpose of Ethereum, making it now a security (more like Bitcoin than a digital token).
But it’s arguably closer to meeting Howey’s factor, especially with attributes like cryptocurrency lending, where the SEC has already claimed to be able to turn products into securities (look BlockFi action). However, PoS is quite different from cryptocurrency lending platforms where tokens are staked and interest is earned by what the lending firm does, not the collaboration of the stakers. So in the context of what the Ethereum blockchain is primarily used for (smart contracts) and how its coins are mined, it still seems hard to see Ether as security.
Related: Biden’s Cryptocurrency Framework Is A Step In The Right Direction
Second, the SEC’s claim that transactions made on the Ethereum blockchain are under the jurisdiction of the U.S. has more Ethereum nodes than any other country in the U.S. Expand well beyond the United States. Based on that reason, the SEC can claim jurisdiction over Ethereum-based tokens developed in Germany and offered and sold in Germany exclusively to Germans. Such an outcome seems highly unlikely to pass a legal convocation.
Does all this aggressive stance by the SEC presage enforcement action against Ethereum (who would it sue, anyway?) or action against foreign parties for foreign conduct on Ethereum? A negotiating tactic designed to scare you into voluntarily surrendering to SEC jurisdiction. “Come, talk to us, register” essentially. If Ethereum risks being considered a stock/exchange, Ethereum! All tokens and decentralized financial platforms certainly do (for now).
Adam Pollett A partner in Eversheds Sutherland’s Securities Enforcement and Litigation practice, we assist financial institutions, broker-dealers, investment advisors, and individuals in regulatory investigations and enforcement matters involving the U.S. Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA). Defend and state securities regulators.
Andrea Gordon He is an attorney at Eversheds Sutherland, advising clients on white collar, compliance, SEC and FINRA matters. She has extensive experience conducting internal investigations, evaluating and developing corporate compliance programs, and representing both corporate and individual clients in regulatory investigations, administrative proceedings and complex commercial litigation.
This article is for general information purposes and is not intended, and should not be construed as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author and do not necessarily reflect or represent the views or opinions of Cointelegraph.
