Is Ethereum [ETH] a security or in a regulatory ‘gray zone’? – U.S. federal regulators


As reported by the Wall Street Journal [WSJ] on May 1st, Ethereum [ETH] will be scrutinized by the U.S. federal regulators, the main question being, whether Ethereum must be classified as a security under U.S. law or not.

Reports have said that the world’s second largest cryptocurrency, ETH, is in a regulatory ‘gray zone’. In July 2014, in the world’s first Initial Coin Offerings [ICOs], the Ethereum Foundation managed to raise about 31,000 BTC, equivalent to about $18.3 million at that time.

The development of the Ethereum platform was done using these raised funds, making it a securities sale according to regulators. Until now, there were no questions raised by regulators on the rules that must apply to virtual currencies, which will be based on the rules designed for stocks. However, Bitcoin [BTC] managed to escape the situation and the focus is now on altcoins like ETH.

In a speech, Gary Gensler, former CFTC chairman, said:

“there is a strong case that one or both of ETH and Ripple’s [XRP] are noncompliant securities,”

In 2014, under the U.S law, ETH should have been registered with the U.S. Securities and Exchange Commission [SEC] if it is deemed a security.

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Gensler also noted that since the ETH coins are now mined, it could be able to avoid being classified as a security. The possible measure will be discussed on May 7th by SEC and CFTC officials.

A crypto enthusiast tweeted:

“It would be mind boggling for the US to decide to ‘exit all crypto markets’ . Won’t happen. Economic suicide.”

Matt Beckman, a developer, and entrepreneur commented;

“We need a new commission whose sole purpose is regulating crypto assets, so the SEC can stop trying to apply umbrella policy to everything.”

Another Twitter user commented:

“Not gonna lie…my biggest concern is that someone is there to explain why ETH is not a security. I don’t have a lot of faith in the government after the Zuckerberg testimony…”

An amateur trader said:

“From my experience of 10 years dealing with the SEC on these exact types of matters, they will default that everything questionably a security is a security until the courts tell them otherwise. I guess we’ll find out next week though.”

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