Ethereum In The Crosshairs: SEC Chair’s Changing Perspective On Crypto Securities

Feb. 27, 2023
Ethereum In The Crosshairs: SEC Chair’s Changing Perspective On Crypto Securities

In a recent interview with New York Magazine, the Chairperson of the Securities and Exchange Commission (SEC), Gary Gensler, hinted at possibly classifying Ethereum (ETH) as a security. This statement provides a fresh take on the ongoing debate around the regulatory status of cryptocurrencies, including Ethereum.

Gensler pointed out that unlike Bitcoin, which has a decentralized structure and no intermediaries. Moreover, most other cryptocurrencies are created by groups of entrepreneurs.  Who use opaque mechanisms to promote their tokens and attract investors.  He said at their core, tokens are securities, as investors are hoping to profit based on the efforts of intermediaries.

The SEC Chair’s remarks shed new light on the complex issue of cryptocurrency regulation and emphasize the need for more comprehensive oversight of the industry. Gensler’s assertion that such tokens fall within the SEC’s jurisdiction also signals a potential shift in the regulatory landscape for digital assets.

It is worth noting that this statement marks a departure from Gensler’s previous reluctance to comment on whether Ethereum should be classified as a security.

Authority Over Ethereum & Bitcoin Sparks Concerns

Crypto regulation has been a major concern for policymakers and investors alike. Earlier this year, legislation was proposed that would have given the CFTC authority to regulate certain crypto products. Additionally,  including Bitcoin and Ethereum, effectively displacing the SEC’s jurisdiction in the area.

However, Gensler believes that the SEC has all the legal tools it needs to regulate the industry. Gensler’s view is that pretty much every sort of crypto transaction already falls under the SEC’s jurisdiction. Therefore, except spot transactions in Bitcoin itself and the actual purchase or sale of goods or services with digital assets.

He argues that there are people behind these digital assets using a variety of complex and legally opaque mechanisms. But at the most basic level, they try to promote their tokens and entice investors.

The claim that crypto investors are hoping to profit is based on the efforts of intermediaries.  However, it is central to Gensler’s position that these are actually transactions in securities that fall within the SEC’s jurisdiction.

Regarding securities law, Gensler’s view is not that hard to understand, though it is still being tested in the courts. The agency has already had some significant wins. But there are other pending legal rulings that industry observers eagerly await, and there is a well-resourced crypto lobby that is not likely to back down anytime soon.

For now, the SEC has emerged as the industry’s primary civil regulator, whether crypto advocates like it or not. However, there are still plenty of big questions about what the agency has been up to in recent years and what its current enforcement strategy will achieve.

Related Reading | Galaxy Digital CEO Defends Bitcoin & Ethereum Against BIS Chief’s Criticisms

Arguably, the federal government’s actions – including those of the SEC – did not do much to prevent the loss of trillions of dollars in value over the last year potentially impacting tens of millions of Americans who hold crypto assets in some form.

While Gensler’s comments may unsettle some in the crypto industry. While they may also clarify the SEC’s stance and future regulation approach. However, as the legal battles continue, it remains to been seeing what impact these comments will have on the industry.

Ammar Raza

Associate editor
Skilled in crafting compelling content, with a deep enthusiasm for blockchain technology. I offer precise and easily comprehensible perspectives on cryptocurrencies, decentralized finance, and the ever-evolving landscape. Count on me as a reliable resource to remain informed about the latest advancements in the world of crypto.