NEW YORK, Wednesday, June 19, 2024- The U.S. Securities and Exchange Commission (SEC) said in a letter that it had concluded its investigation into Ethereum, the world’s second-largest Cryptocurrency yesterday.1
The move removes the cloud of uncertainty surrounding Ethereum’s regulatory status as a security.
The news, announced by blockchain software company ConsenSys on Tuesday, was met with enthusiasm by the Ethereum community. 2
ConsenSys, which has a vested interest in Ethereum’s success, is now seeking a formal declaration from the SEC that its MetaMask Swaps and Staking products do not violate securities laws.
The SEC’s decision comes after months of speculation about Ethereum’s classification.
Some legal experts believed the SEC might classify Ethereum as a security due to its pre-mined initial coin offering (ICO). This classification would have subjected Ethereum to stricter regulations.
The positive outcome for Ethereum was further bolstered by a large buy order.
According to blockchain data tracker Lookonchain, a single investor, often referred to as a “whale” due to the substantial size of their holdings, purchased over 5,600 ETH, valued at approximately $19.6 million, shortly after the news broke.
Analysts believe the SEC’s decision and the subsequent whale purchase signal growing confidence in Ethereum’s future. However, the regulatory landscape for cryptocurrencies remains fluid, and future SEC actions could still impact the industry.
In 2018, the SEC declared that Ether is not a security. However, in 2023, the SEC secretly began claiming regulatory authority over Ether, initiating an investigation into Ethereum. In response, Consensys sued the SEC on April 25, 2024, seeking a court order to halt the investigation, arguing that ETH is a commodity and thus outside the SEC’s jurisdiction.
The lawsuit sparked concern among policymakers, including members of Congress, and the public. On June 7, Consensys requested that the SEC confirm that the recent ETH ETF approvals, which were based on Ether being a commodity, meant the agency would end its Ethereum 2.0 investigation.
“While we are gratified by the SEC’s decision to stand down on Ethereum, there is more work to be done to protect crypto in the United States,” ConsenSys said in its statement following SEC’s letter.
It said:
“It is imperative that the SEC abandon its unprincipled and opaque regulation-by-enforcement campaign in favor of much-needed regulatory clarity for an industry that serves as the backbone to countless new technologies and innovations. In that light, our lawsuit also asks a federal court to find that we neither act as a broker nor issue securities through our software offerings MetaMask Swaps and Staking.
“No company or individual should find itself in our position, having to resort to costly litigation to obtain clarity about what is and is not lawful. As we asserted in our lawsuit, “Consensys is built on creating software products that allow people around the world to use and build on top of the Ethereum network, and it is entitled to run its business without the cost, burden, and uncertainty of an unlawful enforcement action.” The same is true for the crypto industry at large. We hope today’s development marks the beginning of a new path forward.”
SEC’s announcement letter can be seen here.
- assets.ctfassets.net: https://assets.ctfassets.net/gjyjx7gst9lo/6BtUdxsw1vlatBjIspkJN9/792adab194b9ac71c1eeeded42b01615/Termination_Notice_K._Schwartz_6.18.24.pdf[↩]
- consensys.io: https://consensys.io/blog/sec-closes-ethereum-2-0-investigation-will-not-pursue-ethereum-enforcement[↩]
