Securities laws may apply to Ether staking, warns SEC
The long-awaited Ethereum merge has transformed the blockchain into Proof-of-Stake (PoS). On Thursday, the upgrade was completed, which was welcomed by crypto investors all around the globe.
Gary Gensler, the chair of the Securities and Exchange Commission (SEC), has also followed the developments. He hinted that Ethereum might be considered security after the upgrade. Gensler also warned that the securities laws might also apply to Ether staking. He shared his points while speaking to the media after testifying before the Senate Committee.
Ether staking could trigger securities laws
According to the SEC chair, any digital coin or intermediary that investors can ‘stake’ will be identified as ‘security’ through the Howey Test. The Wall Street Journal reported that Gensler remarked, “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.”
Though the chair has not mentioned any particular cryptocurrency, the remarks were made the same day as the Ethereum Merger. Many speculate that he was referring to Ether staking as its consensus mechanism has changed from Proof-of-Work to Proof-of-Stake.
Gary Gensler also explained that staking is quite similar to lending. About this, his comments were, “[it] looks very similar—with some changes of labelling—to lending.”
SEC stance on securities
A security asset generally includes bonds and stocks. The service providers related to this type of assets in the United States must disclose them per the defined securities laws of the 1930s. That’s why any crypto exchange or brokerage also has to comply with these laws. If any asset is deemed a security, regulators might take legal action against the service provider.
The regulators deemed the XRP token as a security and charged the firm for irregularities.
The conclusion of this case might affect several other tokens too. The regulators also penalised BlockFi with a $100 million fine as it failed to register its interest accounts.
Author: Wasay Ali
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