The chairman of the US security and Exchange Commission, Gary Gansler says that Ethereum’s new PoS system could trigger security laws. Gary came out to share the information a few hours after the Ethereum Merge.
The Securities and Exchange Commission(SEC) has been monitoring the crypto space. The focus is on fraud and security threats. SEC ensures firms offering crypto services register with them. Failure, a fine of up to $100 million penalty is applicable.
There is no specific mention of particular crypto that can trigger security laws. Ethereum’s upgrade to proof of stake may have put cryptocurrency back on the radar of the Securities and Exchange Commission. Gary informs reporters that;
“…cryptocurrencies and intermediaries that allow holders to “stake” their crypto may define it as a security under the Howey test, according to The Wall Street Journal…”.
“…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.”
This means that allowing holders to stake coins can cause the public to anticipate profits from other people’s efforts. Previously, SEC did not view Ethereum as a security threat. This is because CFTC and SEC agreed to act like a commodity.
Gary Gansler is right because many people took to Twitter to express public opinions about the Ethereum PoS Network. The cryptocurrency community says that Ethereum is now centralized and has no difference from fiat. People took to cryptocurrency because of its decentralized nature, something that Ethereum no longer has.
Crypto Developers Should Work With the SEC to Find Common Ground
Through collaboration, developers, investors, and regulators can establish best practices and improve the quality of cryptocurrency development. Regulators must find a balance between protecting consumers and creating a business environment. Regulation can play an important role when markets face distortions. This is due to externalities or information asymmetries.
Regulation can also stifle entrepreneurship and business creation. This makes society and people even worse. The Securities and Exchange Commission is hostile to cryptocurrency companies and entrepreneurs. For example, SEC Chairman Gary Gensler considers Bitcoin (BTC) a commodity but said that other financial assets have aspects of securities.
“…virtual financial assets have important attributes of securities.”
Gary, when talking about securities regulation also claims that,
“…other assets can replace ‘crypto assets.
Other crypto enthusiasts claim that instead of regulating by the comment, a better strategy to improve the quality of crypto projects is key for SEC. The least we can do is work together on common standards. Establish best practices that benefit the entire community of Web3 participants.
Is the SEC Regulating Cryptocurrency a Good Thing?
Launching an investigation into trading organizations like cryptos makes SEC maintain security in these organizations. The recent rise of fraud and security threats in cryptocurrency creates a bad name for SEC. SEC is more cautious and charges companies that launch crypto businesses without registration. Gary is a member of the senate that sees the need for SEC. SEC must not use its powers to harass small and upcoming crypto organizations.
