SEC Decision: Ethereum as a Security or Commodity?

Considering the reality that cryptocurrencies are quite new in the world of finance, it’s a reality that regulators still haven’t made up their mind how to approach the industry. In fact, in 2018, Bitcoin was able to reach $20,000 only to plummet after series of regulatory changes that happened worldwide.

Now, Ethereum is under scrutiny by the Securities and Exchange Commission (SEC). The question is whether or not to consider Ethereum as a security or a commodity. If the SEC decided to consider Ethereum as a security, then it could have a huge impact especially for Initial Coin Offerings that have been funded using the Ethereum network.

There was an announcement that the SEC and the CFTC officials are going to have a meeting on May 7, 2018, in order to decide on the future of not only Ethereum but also Ripple. However, there is still no announcement regarding their decision. According to Paul Vigna, it was only a regular working group discussion.

Different Takes by Regulators

Different regulators worldwide have a different take when it comes to cryptocurrencies. In fact, Venezuela and Russia both created their own cryptocurrencies while other countries dropped cryptocurrencies.

There are countries that are also regulating crypto exchanges. In fact, Japan has issued its new rules regarding crypto exchanges in order to prevent another Coincheck scandal. And because of this change in their approach, cryptocurrency exchange Kraken will no longer continue serving customers from Japan.

SEC is still exploring whether or not it has the purview over Ether. Or perhaps, should the cryptocurrency fall under the authority of another agency being a commodity.

Zach Fallon who worked as a former senior council with the SEC who now works as securities law attorney and consultant as well as senior legal advisor for Dispatch Labs mentioned that “I think the flexibility is there to come out in either direction”.

Investors Remain Confident

April was a good run for Ethereum. Entering April 1 at $358 and going all the way to $734 currently, it’s a big deal for the second largest cryptocurrency by market capitalization. However, it is worth mentioning that the price slowed down by 7{4ede17fdd9b4ce8121d01fc4b54913fe84f8215aace504cc657695cefb5329ff} before being able to recover. Experts believe that it could actually because of fear that SEC could consider Ethereum as a security.

If you will look at the trend experienced by Ethereum since it was able to reach its all-time record of $1,200, it dropped to even as low as $380. One of the reasons is the tight regulatory pressure on ICOs. One of the biggest concerns is that ICOs could actually be used for illicit activities.

What could be the future of Ethereum? Though it is true that regardless of the SEC ruling, everything is still uncertain. However, Ethreum co-founder Joseph Lubin who now runs blockchain production studio ConsenSys mentioned that “We spent a tremendous amount of time with lawyers in the US and in other countries and are extremely comfortable that it is not a security; it never was a security”. He also mentioned that the Howey test dictates if Ethereum is a security or not.