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U.S. Federal Agencies Investigating Whether Ethereum is a Security

Federal securities and commodities regulators in the United States are currently investigating Ethereum.

They are seeking to determine whether the second largest cryptocurrency should be deemed a security.

U.S. Federal Regulators

U.S. federal regulators from the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) are looking into a number of the top cryptocurrencies.  They are trying to determine whether or not those digital currencies should be regulated as securities in the United States under that country’s federal laws, said a report from the Wall Street Journal.

A considerable focus for the investigation is ether – the Ethereum blockchain’s crypto coin.  The cryptocurrency first became available in 2014 via presale.  In 2015, new currency units were introduced when the network’s launch included mining.

Today, Ethereum is the second most valuable cryptocurrency in the world.  It has a $65 billion circulating marketing cap.

Etherium’s Maturity

The Wall Street Journal’s report cited sources close to the matter.  They indicated that the federal regulators are working to determine whether the creators of Ethereum “exert significant influence over their value, in the same way a company’s stock price depends on its managers and their strategy, performance, and investments.”

For example, in 2017, the price of ether temporarily tanked following a false rumor that Vitalik Buterin, the cryptocurrency’s creator, had been killed in a car crash.  That said, many analysts feel that the crypto has had the chance to fill out since that time, to the point where that type of rumor would not have as significant an impact on the coin’s value.

U.S. regulators may also think about the extent of the demand for the cryptocurrency from individuals spending it to operate decentralized applications (DApps) on the network, instead of speculators who are buying the coin specifically for its potential as an investment.

Noncompliant Securities

Gary Gensler, former chairman of the CFTC, recently stated that he would classify both Ethereum and Ripple (another large cryptocurrency) as “noncompliant securities.” That said, he did state that the American regulators could decide that the decentralization of ethereum has reached such a point since its launch that it has moved beyond Gensler’s noncompliant securities classification.

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.