(Kitco News) – Etherum (ETH) The merger was the talk of the crypto sphere for most of 2022, and its successful completion on Thursday marked the culmination of years of hard work and development. Unfortunately, the shift to proof-of-stake (PoS) may have had unintended consequences for Ether token holders.
In a talk on Thursday, Securities and Exchange Commission (SEC) Chairman Gary Gensler suggested that tokens and intermediaries that allow users to “stake” their coins could pass one of the Howey test qualifications, which is used to determine if an asset is a security.
“From the perspective of the coin…this is another indication that, according to the Howey test, the investing public anticipates profits based on the efforts of others,” Chairman Gensler said following a congressional hearing. , clarifying that it was not referring to any particular cryptocurrency.
Whether digital assets should be considered securities is one of the most contentious topics in crypto and has even led to interagency disputes as the SEC and the Commodity Futures Trading Commission (CFTC) argue over who can regulate the nascent. asset class.
Gensler had previously made it known that he considered Bitcoin (BTC) as a commodity, but has been less outspoken about his view of Ether, suggesting that it has always been seen as a security in his perspective.
Ether is far from the only network affected by this new line of discussion, as other leading PoS platforms like Cardano and Solana could also fall under the definition of an “investment contract”, which means that they would be subject to the same category of securities. laws that apply to stocks and bonds.
This would require issuers of these tokens to file detailed disclosure documents and comply with strict consumer protection rules. Gensler also said that platforms offering staking services to customers, such as crypto exchanges, “look very similar – with some labeling changes – to loans.”
The crypto community responds
Gensler’s comments sparked an intense discussion between Ethereum proponents and Bitcoin maximalists, including Michael Saylor, the co-founder of MicroStrategy and a staunch supporter of BTC.
As supporters of each camp jumped into conversation to defend their point of view, the best explanation for the situation was summed up in the following tweet from Jake Chervinsky, Head of Policy at the Blockchain Association, who highlighted the need for the government to develop clear specifications when it comes to digital assets and things like staking.
The general idea seems to be “if you squint hard enough, staking kind of looks like a dividend or interest, and some real stocks have that, so maybe staked assets are stocks too”.
That is not how the law works. It just means that holders of staked assets expect profits…
—Jake Chervinsky (@jchervinsky) September 16, 2022
Taken by itself, the expectation of profit by itself “does not turn assets into securities,” according to Chervinsky, who noted that “people hold all kinds of assets with an expectation of profit. Gold, cars, watches, etc.
“The expectation of profit is only one of the four prongs of the Howey test and probably the least important for volatile assets (i.e. non-stable coins)”, Chervinsky stress. It is “a feature of all investable commodities, not just securities. Whether that profit comes in the form of a market price increase, a staking reward, or some other mechanism should make no difference to security analysis.
For now, the debate over the status of PoS assets like Ether continues and will likely remain contentious until regulators provide clear guidance on the matter and enshrine it in law.
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