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SEC Chair Says Ethereum Could Face Scrutiny Following the Merge

UTC by Ibukun Ogundare · 3 min read
SEC Chair Says Ethereum Could Face Scrutiny Following the Merge
Photo: Depositphotos

Over time, the SEC has warned that firms offering crypto-lending products must register with the Commission.

There have been different opinions and comments from many industry experts, including SEC chairman Gary Genser on possible events that may follow the Ethereum Merge. According to the chair, Ethereum may find itself under SEC scrutiny after the Merge. Gensler spoke about the possibilities on Thursday, noting that the transition from proof-of-work to proof-of-stake could cause the Commission to consider regulating Ethereum as a security.

The Ethereum Merge finally took place after years of anticipation. One of the developers that worked on the Merge, terence.eth announced in a tweet:

“We merged! What a surreal feeling after working on the beacon chain for two years and the merge for two years. This was the most complex project I’ve ever participated and it wouldn’t have been possible without all the brilliant minds. History was made today! Congrats!”

SEC Chair Mentions Possible Scrutiny Hours After Ethereum Merge

Gensler made the possible SEC scrutiny comment hours after Ethereum finalized its shift to the proof-of-stake model. He talked about the Howey test, saying that cryptocurrencies and intermediaries that let holders “stake” their coins might pass a key test named the Howey test. Notably, courts use this test to examine if investors expect to receive a return from the work of third parties. Citing Gensler, who said he is not referring to a particular crypto, TheWall Street Journal stated:

“From the coin’s perspective… that’s another indicia that under the Howey test, the investing public is anticipating profits based on the efforts of others.”

Staking is one of the two ways crypto networks verify transactions on their platforms. The likes of Solana, Cardano, and some other large cryptocurrencies verify transactions through staking. And now, Ethereum investors can lock their tokens for a period of time and get returns. According to Gensler, if a crypto exchange acting as an intermediary offers staking services to its consumers, that “looks very similar- with some changes of labeling- to lending.”

Over time, the SEC has warned that firms offering crypto-lending products must register with the Commission. Due to failure to comply with the order, BlockFi was forced to pay $100 million earlier this year. Federal agencies, including the Commodity Futures Trading Commission, have been meeting over crypto jurisdiction. Similarly, the Senate Banking Committee, which is in charge of the SEC, had a hearing for members to question Gensler.

Competition Over Crypto Jurisdiction

Last month, leaders of the agricultural group proposed a bill that designates Bitcoin and Ether as digital commodities other than securities. Under the bill, the CFTC would have the power to regulate digital commodities. As such, Coinbase (NASDAQ: COIN), FTX, and some other exchanges will have to register with the CFTC.

Fingers are crossed on what will follow the long-anticipated Ethereum Merge that finally happened.

Altcoin News, Blockchain News, Cryptocurrency news, Ethereum News, News
Ibukun Ogundare

Ibukun is a crypto/finance writer interested in passing relevant information, using non-complex words to reach all kinds of audience. Apart from writing, she likes to see movies, cook, and explore restaurants in the city of Lagos, where she resides.

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