Then again… Is Ethereum a security? 

The debate surrounding Ethereum’s classification as a security and its implications.
| Cryptopress
Last updated: March 10, 2023

By CryptoPress

In Brief:

  • US regulators and bitcoin maximalists advocate that Ethereum is a security
  • They cite the presence of a recognizable co-founder Vitalik Buterin and a centralized body called the Ethereum Foundation
  • They claim that because its issuance can be controlled via updates of the underlying code, Ether should be deemed a security
  • Others argue that Ethereum is not a security

Ethereum’s classification as a security has been a topic of much debate. On the one hand, US regulators and bitcoin maximalists argue that Ethereum is a security. As proof, they point to the fact that Vitalik Buterin is a well-known co-founder and that the Ethereum Foundation is a centralized group. They also say that Ether should be considered a security because the way it is given out can be changed by making changes to the code underneath it.

On the other hand, others argue that Ethereum is not a security. In fact, some people say that putting it in this category could be bad for investors. It is obvious that regulators and industry experts will continue to discuss this issue in depth, regardless of which side of the argument they take.

Negative Implications 

What are some negative implications for investors if Ethereum is classified as a security?

If Ethereum is considered a security, investors might be less willing to put money into the cryptocurrency market as a whole. Also, the value of Ethereum and the altcoins that go with it could go down, causing investors to lose a lot of money. It could also fall under stricter regulations from the SEC.

What if Eth is a security? 

If Ethereum is considered a security, it would have to follow more rules, which would make it harder for it to grow. It would have to be registered and reported to the government, which would limit how it could be used. Crypto exchanges would have to register with the SEC since they’d be trading in securities and would face fines if they didn’t. The price of ether would probably fall if exchanges stopped trading in it to avoid breaking securities laws.

Arguments against classifying Ethereum as security

There are several arguments against classifying Ethereum (ETH) as a security. The fact that ETH is decentralized and not controlled by a single entity is one of its main defenses. Traditional securities, which are typically issued by a central authority, are not like this. 

Also, the Ethereum blockchain was made to be a platform for decentralized applications, not a way to raise money or give investors their share of the profits.

Another argument is that ETH is used as a utility token on the Ethereum platform, where it is used to pay transaction fees and encourage network participants to validate transactions. So you could say that ETH is more than just a way to invest.

Also, the fact that Heath Tarbert, the head of the US Commodity Futures Trading Commission (CFTC), has said that both Ethereum and stablecoins should be thought of as commodities supports the idea that Ethereum is not a security. According to Tarbert, these digital assets are valuable and usable because a physical asset backs them up.

Lastly, it’s important to note that the Securities and Exchange Commission (SEC) has not called Ethereum a security, even though there are still debates about how it should be regulated.

In short, the fact that Ethereum is decentralized, that it can be used as a utility token, and that the SEC hasn’t called it a security are all reasons why it shouldn’t be considered a security. Also, the chairman of the CFTC recently said that Ethereum should be considered a commodity, which adds to the case against it being a security.

© 2022 Cryptopress. For informational purposes only, not offered as advice of any kind.


More Articles

CFTC Sues Binance and Its CEO for Alleged Violations of US Trading Laws

In Brief: The CFTC has sued Binance CEO Changpeng Zhao and his crypto empire for allegedly violating US trading and derivatives laws. The …

Polygon’s Zero-Knowledge Rollup zkEVM Beta Goes Live

In Brief: Polygon has released its Layer 2 blockchain built with zero-knowledge technology, becoming the second company in four days to make…

Arbitrum’s Homepage Crashes Amid Rush to Claim ARB Tokens

In Brief: Arbitrum’s homepage briefly crashed as users rushed to claim their ARB tokens. The majority of eligible wallet addresses are exp…
(Visited 15 times, 1 visits today)
© Cryptopress. All rights reserved.