The cryptocurrency industry is on high alert following recent actions by the United States Securities and Exchange Commission (SEC). According to Fortune, the SEC issued subpoenas to entities associated with the Ethereum Foundation on March 20. This move is seen by some as an attempt to classify Ethereum’s native cryptocurrency, Ether (ETH), as a security.
The potential implications of such a classification are significant, as it could impact the approval of spot Ether exchange-traded funds (ETFs). Industry leaders are expressing concerns and suggesting that this could be a coordinated attack on Ethereum. They believe that the SEC may use this as a pretext to delay or reject applications for spot Ether ETFs.
Paul Grewal, the Chief Legal Officer of Coinbase, responded to these developments by highlighting that the SEC lacks a solid basis to reject ETH ETP (Exchange Traded Product) applications. He pointed to previous statements from SEC Chair Gary Gensler, who testified before Congress that Ether is not a security. Grewal hopes that the SEC will maintain its stance supporting Ether’s non-security status.
Travis Kling, Chief Investment Officer of Ikigai Asset Management, sees this as a targeted campaign against Ethereum. The SEC’s hesitance on Ethereum ETFs has dampened expectations within the industry. Fox Business reporter Eleanor Terrett suggests that the subpoenas may explain the SEC’s reluctance to engage with proponents of spot Ether ETFs. Bloomberg ETF analysts Eric Balchunas and James Seyffart have lowered their expectations for ETF approval to a 25% chance by May, down from 70%.
Brian Quintenz, a former Commissioner of the Commodity Futures Trading Commission (CFTC), highlights the contradiction in the SEC’s actions. He notes that the SEC previously recognized Ether as a non-security when approving Ether futures ETFs. Quintenz believes that the SEC should not reverse its stance without valid reasons. The Ethereum community and investors are closely watching the SEC’s next steps, as reclassifying Ether as a security could have significant legal and regulatory implications.
The SEC’s ongoing investigation has created uncertainty around the future of Ether ETFs. Decisions on spot Ether ETF applications have been postponed to May or later. Major financial and investment firms, including BlackRock, VanEck, ARK 21Shares, Fidelity, Invesco Galaxy, Grayscale, Hashdex, and Franklin Templeton, have applied for these ETFs. Despite the regulatory hurdles, some analysts remain hopeful that approval for spot Ether ETFs may come before 2025.
The debate over Ether’s classification as a security has been further complicated by Ethereum’s transition to a proof-of-stake consensus mechanism in September 2022. Charles Hoskinson, the founder of Cardano, suggests that this change may have influenced the SEC’s perspective on Ether. However, Quintenz counters this argument by noting that the Ethereum Merge occurred before the approval of Ether futures ETFs, indicating that the SEC had already considered this change.
