SEC Chair Contends Merge Upgrade Will Alter Status Of Ethereum From Commodity To Security
When the crypto community eagerly awaits the Merge’s conclusion, which will help the Ethereum Platform transition from the PoW to Proof-of-Stake (PoS) on Thursday, someone was also looking closely at the new developments. It was SEC chair Gary Gensler also had all ears to the developments. The SEC is already embroiled in a bitter litigation with XRP Ripple on the question that XRP is a Security.
As soon as the Merge event was concluded the SEC Chair Gary Gensler stated that it must be cleared if an asset is a security or something else. The Howey test, referred to by the SEC Chair, is a benchmark that decides if investors expect a return from the work of third parties.
Speaking to reporters post the Congressional hearing on Thursday, the SEC chair told reporters: “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”.
Gensler made it clear that he was not referring to crypto assets at this juncture. However, Gensler’s statements have led to alarm bells going off post one of the biggest software upgrades and change over the POW to PoS of the Ethereum platform.
The SEC has been very clear in its outlook towards digital assets and wants to bring it under the purview of the securities laws. It wants this to be enforced especially those crypto assets which is traded with a promise of profits in the future.
The Ethereum and Bitcoin was based on the Proof Of Work protocol. However, this changed with the Merge software and today the platform uses Proof-of-Stake (PoS) model has been quite popular with crypto staking as a way to verify blockchain transactions.
Crypto Staking-Different Interpretation by SEC Chair
For the SEC Chair, Crypto asset trading is akin to lending with cosmetic changes and re-labeling. The SEC chair has made it clear that firms that offer crypto lending products must register with the agency.
The Bone of contention between the crypto community and the SEC is if crypto assets are securities or commodities. Last month, the crypto bill by the agricultural committee made it clear that both ETH and BTC are commodities.