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- SEC Chair Paul Atkins again informally declared that Ethereum is not a security and has the same status as Bitcoin in its regulatory classification.
Ethereum Aligns with the Non-Security Status of Bitcoin
Paul Atkins, chair of the US Securities and Exchange Commission (SEC), reiterated his stance on the regulatory status of Ethereum (ETH) during an interview with CNBC. The securities watchdog “informally” aligned Ether with Bitcoin (BTC) as a commodity.
“Similar to Bitcoin, I mean the SEC has stated informally more than formally that Ether is not a security,” Atkins explained.
The Howey Test established Bitcoin’s classification as a commodity. The legal framework determines if a transaction qualifies as an investment contract and, therefore, a security.
For an asset to be security, it must have the following elements under the Howey Test:
- A party invests money
- In a common enterprise
- With the expectation of profiting
- Based on the efforts of a third party
The Commodity Futures Trading Commission (CFTC) found that Bitcoin didn’t satisfy the requirements of the Howey test in 2015. Hence, it does not fall within the ambit of securities investments.
Although Ethereum hadn’t been a subject of the Howey Test by regulatory bodies and courts yet, Atkins’ pronouncement somehow helps offer clarity on where the current SEC administration stands in the matter.
Ethereum’s Foundational Role in the Crypto Industry
The SEC chairman also highlighted the Ethereum chain’s transformative role in the digital asset space. By far, it’s the most popular chain for decentralized finance (DeFi) applications, non-fungible tokens (NFTs), supply chain management, decentralized autonomous organizations (DAOs), cross-border payments, real-world asset tokenization (RWA), and other real-world applications.
“And so, but it’s obviously, the ETH blockchain is a very key component for a lot of other digital currencies,” he added.
Along the way, Atkins stated that companies are free to decide whether they should include Ether in their portfolio. They also have free rein on their ETH strategy. He said it’s not in his place to tell them how to deal with digital assets. The crypto-friendly regulator believes that businesses having that kind of freedom is key to supporting more innovation and developments in the industry.
The Previous SEC Probe on Ethereum
The SEC notably launched an investigation on Ethereum following the chain’s merge event in 2022. Former Chair Gary Gensler claimed that ETH’s transition from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism mirrored the inner workings of a security investment from a technical standpoint.
As a result, the regulator issued subpoenas to several companies to investigate if Ethereum is indeed a security. After a widespread backlash aimed at the agency, it eventually abandoned its probe into the chain and its token, but has not ruled that it’s not a security.
With that, Atkins’ emphasis on the word “informal” when speaking about Ether’s regulatory status is a reminder that there’s no official rulemaking or legal decision yet that assigns its official classification among digital assets.
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