US Regulators Examining Whether Ethereum Should Be Classified As A Security
US federal securities and commodities regulators are looking into whether ethereum (ETH), which is the world’s second largest cryptocurrency, should be considered as a security.
Based on the Wall Street Journal, the regulators at the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) are examining whether many famous cryptocurrencies-not only initial coin offering (ICO) tokens- should be regulated as securities under federal law.
The main focus of the investigation is the ether – the native asset of the Ethereum blockchain- units of which are initially sold through a presale in 2014, through new currency units have been released through mining since the network’s introduction in 2015.
With a market cap of an estimated $65 billion, Ethereum presently stands as the world’s second most valuable cryptocurrency.
Even though the report does not say much, sources that are familiar with the situation state that regulator is examining whether ethereum’s developers “exert significant influence over their value, in the same way, a company’s stock price depends on its managers and their strategy, performance, and investments.”
For example, last year, ethereum price dropped shortly following claims that developer Vitalik Buterin has died in a car crash, but according to some analysts, the project is strong enough that such an incident will not significantly affect ETH’s value.
Regulators may also think about what extent of demand for ether comes from people who use it to operate decentralized applications (DApps) on the network, different from speculators who buy it just for investment gains.
“Applying those factors, it’s still sort of gray,” one person familiar with the probe told the publication.
Former CFTC Chairman Gary Gensler recently noted that he will term ethereum and ripple as “non-compliant securities,” even though he agrees that regulators may determine that ethereum has become so decentralized given its network implied that it no more meets this term.
