Ethereum: SEC drops its proceedings

Wednesday, June 19, 2024

After months of investigation, the US securities regulator has ruled that the world's 2nd largest crypto is not a financial security, but a commodity. ConsenSys, which was heavily involved in the case, hails this as a landmark decision for the sector.

It's a decision that could mark a turning point in the crypto industry, at least in the United States. This Wednesday, ConsenSys announced that the US securities regulator (SEC) had dropped its case against Ethereum, which it no longer considers a "financial security".

"Today, we are very pleased to announce a major victory for everyone working in the Ethereum ecosystem," the US company, which helped develop the second-largest blockchain on the planet - behind Bitcoin - hailed in a tweet.

The SEC had opened an investigation in 2023 considering that the ether should be considered a financial security, which exposed all developers and companies linked to Ethereum to potential prosecution for violating the law on financial securities. In addition, its distribution would have been much more complicated as only companies with regulated exchange status would have been able to do so (which is not the case for crypto exchange platforms).

On 25 April, ConsenSys attacked the SEC, taking the view that its boss, Gary Gensler, and his teams were overstepping their rights and that ether should be considered a commodity, as it the SEC had in fact suggested in... 2018.

After a two-month legal battle, ConsenSys finally won its case and the SEC, which has meanwhile validated the Ethereum Spot ETFs, has decided to drop its proceedings for good. After bitcoin, ether is therefore the second cryptocurrency to escape financial securities regulation and be considered a commodity.

Other projects could try the same thing

Other projects will obviously try to get a similar ruling. For years, Ripple has been in court with the SEC, which accuses it of breaking the law on financial securities with its XRP tokens.

But the industry should not be too quick to claim victory: projects that have raised funds and on which small groups of developers can control a large part of the protocol still have a strong chance of being reclassified as financial securities.

This analysis is not investment advice. It has been prepared without taking into account your personal situation, particularly your financial situation, risk profile, and investment objectives.

Before investing in any product, investors should fully understand the risks involved and consult their own legal, tax, financial, and accounting advisors.

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