Ethereum Wins As US SEC Ends Securities Investigation

The cryptocurrency industry was jolted with clarity and optimism when the U.S. Securities and Exchange Commission (SEC) announced that it would end its investigation into Ethereum 2.0 and would not pursue any enforcement action. The decision marks a significant victory for Ethereum and could become an important reference point regarding the treatment of digital assets under U.S. securities law.

Ethereum is not a security

In 2018, the SEC made the important distinction that Ethereum is not a security. However, by 2023, amid evolving features and the transition to Ethereum 2.0, the SEC reconsidered this position and signaled possible regulatory oversight. This change led to increased scrutiny and uncertainty within the Ethereum community, which led to ConsenSys filing a lawsuit on April 25, 2024. The lawsuit argued that the SEC had no jurisdiction over Ethereum transactions and governance, and sought to confirm its classification as a commodity.

In a critical response dated June 7, 2024, ConsenSys asked the SEC to allow its approval of an Ethereum-based ETF, which took place earlier in May, 2024. The approval was based on the premise that ETH was a commodity. ConsenSys argued that this should finally end the SEC’s investigation into Ethereum 2.0.

The SEC’s enforcement division formally Responded This was communicated in a letter sent to ConsenSys lawyer Kevin S. Schwartz on June 18, 2024. The letter stated: “We are pleased to inform you that our investigation into the above-mentioned matter has concluded. […] Based on the information we have at this time, we do not intend to recommend any enforcement action by the Commission.”

Importantly, the S.E.C. Underlined He also said that the shutdown should not be viewed as an exoneration, and that ultimately no action may result from the staff’s investigation. That said, ConsenSys attorney Laura Brookover emphasized the significance of the development, saying, “The SEC today served the company with a notice of closure of its Ethereum 2.0 investigation. Since we filed our lawsuit against the SEC in late April, the situation has changed surprisingly quickly, leading to today’s developments.”

The resolution could be seen as a watershed moment for the crypto industry as a whole, particularly in terms of the classification and regulation of digital assets. Paradigm’s Alexander Grieve noted the tone of the SEC’s notice, commenting that “While the notice is fairly vague and evasive, it is relatively unusual for the SEC to specifically highlight to companies that it has closed its investigation.”

If the investigation is concluded without enforcement action, it could set a precedent for how regulators treat other cryptocurrencies and lead to a more relaxed regulatory environment for digital assets.

While the threat of imminent enforcement action has been abated, ConsenSys and the crypto industry at large are hoping for further clarity on regulatory policy. In its lawsuit, ConsenSys is seeking a federal court ruling regarding its operations, claiming that it does not act as a broker or issue securities through its software products, such as MetaMask Swaps and Staking.

As the lawsuit states, “ConsenSys is founded on creating software products that enable people around the world to use and build on the Ethereum network, and it has the right to operate its business without the costs, burdens and uncertainties of unlawful enforcement actions.”

At the time of writing, Ether (ETH) price has responded favorably to the SEC decision, posting a notable 3.3% increase and currently trading at $3,561.

Ethereum Price Surpasses 0.618 Fibonacci Level and Holds One-Week Chart | Source: ETHUSD on TradingView.com

Featured image created by DALL·E and charts taken from TradingView.com

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