SEC Chair Mulls Placing Ether Staking Under Securities Law

SEC Chair Mulls Placing Ether Staking Under Securities Law

After Ethereum’s switch to proof-of-stake, the U.S. Securities and Exchange Commission (SEC) began to think about whether to treat the cryptocurrency as a security (PoS).

In some cases, point-of-sale cryptocurrency transactions may qualify as securities.

The SEC chair was quoted by the Wall Street Journal as saying that staking-enabled digital assets could be classified as securities if they pass the Howey test. Staking is considered a security product under the Howey test since its participants do so expecting to profit from the efforts of others.
The transition to the PoS consensus algorithm on Ethereum has been finalized as of Gary Gensler’s remark.

As a result, the Proof-of-Work (PoW) protocol will no longer be used. In this system, validators would be responsible for vetting transactions and constructing new blocks. “Staking” refers to the procedure of creating blueprints for newly created blocks.

Gensler claims that investors expect a return on their investment when holders stake coins. Moreover, Gensler remarked that staking service providers were analogous to the loan industry in several ways.

The SEC, however, cleared Ethereum of security status just before the Merge. SEC’s declaration was supported by the CFTC’s position. To them, Ethereum is just another commodity. Therefore, the latest change could be perplexing to Ethereum enthusiasts.

American crypto investing firm VanEck’s Gabor Gurbacs, however, disagrees. Gurbacs pointed out that he mentioned how the switch from PoW to PoS would be subject to examination from authorities.

Reward from staking is considered dividends by the authorities, he claims. As it happens, this is a component of the Howey Test.

Supposed “Regulations through Enforcement” by the SEC

Due to the SEC’s inconsistent and frequent statements on cryptocurrency tokens, the agency is at odds with a number of cryptocurrency trading platforms.

The SEC has been looking at the cryptocurrency market for some time now. Those cryptocurrency exchanges that the SEC claims issue security tokens without authorization have been the subject of intense regulatory scrutiny.

And if you want to know what the SEC has been up to lately, go no farther than Ripple vs. the SEC. Ripple Labs Inc. has been suing the government for quite some time now. Ripple has received severe fines from the SEC due to the company’s XRP coin sale.

To get crypto exchanges to register with it, the commission has been accused of using enforcement of regulations as a threat. The SEC’s ability to impose severe penalties was on display in the $100 million case against BlockFi, which Gensler oversaw.

Meanwhile, one problem that service providers in the American crypto realm face is the lack of clear regulations. Authorities such as the SEC and the CFTC are vying for control of the cryptocurrency market. The call for stricter rules is louder than ever because of this.

It is important to remember that in 1946, the Supreme Court of the United States considered a case known as the Howey Test. The court ruled that investment contract transactions are securities. There’s a law for this kind of thing: the Securities Act of 1933.

However, in light of Gensler’s comments, it’s possible that more heated discussions concerning Ether staking are in store.

Orizu Augustine
Orizu Augustine is an experienced crypto writer working for Alltechcraft. Having passion for writing, he covers news articles from blockchain to cryptocurrency and iPhone and Samsung related articles.