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The Securities and Exchange Commission (SEC) may have again targeted Ethereum due to its switch to Proof-of-Stake (PoS). Gary Gensler, the chairman of the Securities and Exchange Commission, stated on Thursday that digital currencies and intermediaries that allow users to "stake" their coins might be able to pass a crucial test used by courts to assess whether an asset is a security. Known as the Howey test, it looks at whether or not investors anticipate receiving a return from the labor of third parties.
SEC's Focus On The New 'Staking' Model
The remarks were made the same day Ethereum (ETH) switched over to Proof-of-Stake. That means the network will no longer rely on "Proof-of-Work" mining, which consumes a lot of energy, and will allow validators to confirm transactions and create new blocks through a process called "staking." According to Gary Gensler, allowing holders to stake coins causes "the investing public to expect returns based on others' efforts." With a few labeling adjustments, Gensler claimed that intermediaries providing staking services to their clients "look quite similar to lending." The Commodity Futures Trading Commission (CFTC) and the SEC have previously stated that they did not view ETH as a security because it behaved more like a commodity.
SEC Monitoring Crypto Market
The SEC has closely monitored the cryptocurrency market, especially those it claims are securities. About the introduction of the XRP token, the regulator has gotten involved in a case against Ripple Labs. Additionally, the SEC has pressured companies that provide crypto loan products to register with them. For example, BlockFi was fined $100 million in February for failing to register high-yield interest accounts that the SEC views as securities. The CFTC would compel exchanges like Coinbase and FTX to register, oversee trading, safeguard investors from mistreatment, and only provide assets immune to market manipulation, among other requirements. Additionally, they would be required to provide details regarding the listed assistance, such as operating procedures and potential conflicts of interest.