SEC investigates Ethereum classification

The approval process for spot Ether ETFs faces hurdles

The regulatory landscape for cryptocurrencies, particularly Ethereum (ETH), is under scrutiny as the Securities and Exchange Commission (SEC) investigates its classification. This investigation, which emerged following subpoenas sent to several companies involved with the Ethereum Foundation, raises questions about whether Ethereum should be labeled as a security.

The SEC's inquiry aligns with broader efforts by the Biden administration to tighten cryptocurrency regulations. While Bitcoin is typically considered a commodity, SEC Chair Gary Gensler has suggested that many other cryptocurrencies, including Ethereum, could be classified as securities.

This potential shift in classification contrasts with previous statements from the SEC. In 2018, former SEC official William Hinman stated that ETH, Ethereum's native token, was not a security.

However, with Ethereum's transition to a proof-of-stake system in 2022 and Gensler's leadership, the regulatory approach appears to be evolving.

The SEC's recent approval of nine exchange-traded funds (ETFs) tracking Ether futures adds complexity to the situation, suggesting a possible commodity status for Ethereum.

Yet, the approval process for spot Ether ETFs faces hurdles, with analysts anticipating rejections due to minimal engagement between the SEC and issuers.

Meanwhile, Coinbase CEO Brian Armstrong has been vocal about the need for Ethereum ETF approval, urging regulators to follow the law and provide equal treatment to cryptocurrencies.

Armstrong highlighted the disagreement between the SEC and the Commodity Futures Trading Commission (CFTC) over Ethereum's classification, suggesting that legal action might be necessary to move forward.

Armstrong drew parallels to the legal battle over Bitcoin ETFs, indicating that court intervention could be necessary to compel regulators to provide fair treatment to Ethereum.

However, the unresolved classification issue clouds the path toward Ethereum ETFs in the US, raising concerns about regulatory precedent and investor uncertainty.

At the beginning of January, the SEC approved all Bitcoin spot ETFs which went live on January 11, including those from BlackRock, Grayscale, Fidelity, and others, marking a significant step for institutional investment in cryptocurrency and potentially widening exposure to the industry.

Following this SEC move, Bitcoin has been on the rise. The cryptocurrency reached its all-time high over $73,000 on March 13, fueled by increased interest from institutional investors and the approval of spot BTC ETFs.

Despite recent volatility and sharp sell-offs, experts anticipate further gains as Bitcoin asserts its dominance in the market, potentially paving the way for broader adoption among retail investors.

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Written by Silvia Pavlof

Silvia has explored various forms of writing, ranging from content creation for social media to crafting movie scripts. Drawing on her experience as a journalist specializing in the gambling sector, she is currently investigating the impact of cryptocurrencies and blockchain on traditional gambling and iGaming.

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