Debate rages over whether Ethereum can be considered a security post-Merge

admin September 16, 2022

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Less than 24 hours after Ethereum (ETH) completed its transition to Proof of Stake, the cryptocurrency community is embroiled in a debate over whether the asset can be considered a security.

SEC Chairman Statement

wall street journal report U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler has said that cryptocurrencies that allow staking may qualify as securities under the Howie test.

Gensler made the statement after reiterating his belief that most crypto assets are securities during a congressional hearing. He said:

“From a coin perspective … this is another indication that under the Howey test, investors expect profits based on the efforts of others.”

Gensler continued that even with the change in labeling, intermediaries like cryptocurrency exchanges that offer staking services offer services similar to lending.

Gensler did not specify any crypto assets.

Community Debates Whether Ethereum Is Security

Some within the crypto community argued that Gensler’s statement meant that Ethereum could be classified as a security.

With Ethereum’s move to PoS, assets will join several other smart contract-enabled blockchains that use staking mechanisms to secure the network.

The SEC chair has said the system used by Ethereum after a software update could trigger securities laws. I have been saying for over six years that the POW to POS migration could attract regulatory attention.https://t.co/3N7v5bcgBo

— Gabor Grubacs (@gaborgurbacs) September 15, 2022

Gabor Gurbacs, strategic advisor at VanECK, wrote that Ethereum’s move from PoW to PoS “could attract the attention of regulators.” Gulbaks said:

“To be clear, I’m not saying that ETH is necessarily a security because of its proof model, but regulators are not saying that dividends are one feature of what securities law calls a ‘joint venture.’ We are talking about staking in the context of Howey test there are other factors as well. “

Adam Cochran argued that the committee’s chairman’s statement was “unsubstantiated FUD by an entity that either doesn’t understand the technology or disregards the legal element.”

Gensler’s comments today raise the question, “Is staking Ether a security?” rose again.

I think it’s baseless FUD by an entity that doesn’t understand the technology or downplays the legal element.

I wrote a counter-argument back in July citing a case on this: https://t.co/rc3ieWOzSz

— Adam Cochran (adamscochran.eth) (@adamscochran) September 15, 2022

crypto advocacy groups coin center In the September 15th blog Positionargued that Ethereum’s move to PoS should not affect its classification.

The nonprofit says that the technical differences between PoW and PoS do not require different processing, and that “the economic realities of chain verification by mining and staking are similar.” .

Meanwhile, Bitcoin (BTC) maximalists, including Michael Thaler, simply tweeted the Wall Street Journal report. Thaler had previously declared his ETH security.

investment manager Timothy Peterson Said;