The United States Securities and Exchange Commission (SEC) has decided to cease the investigation regarding the classification of Ethereum (ETH) as the cryptocurrency associated with the Ethereum network as a security.
This comes after Consensys (an Ethereum software firm) filed a legal complaint with the Federal Court of Texas on 25th April. This led to the exposure of the SEC’s position on Ethereum which showed that the agency and its Chairman Gary Gensler had regarded ETH as a security for quite some time. This has significant consequences for the cryptocurrency market regarding the regulation and categorization of digital assets.
SEC chief Gary Gensler has stated that Ethereum is an Unregistered security trading which is unlawful according to federal laws. This was supported by documents that were produced to show on 28th March 2023. Gurbir Grewal, the SEC’s Division of Enforcement director, signed off on a formal order to investigate Ethereum’s classification. This investigation referred to as Ethereum 2.0 aimed at identifying if the company had engaged in unregistered offerings and sales of ETH since 2018.
The ongoing Ethereum 2.0 investigation has provided the SEC’s enforcement staff permission to investigate and issue subpoenas to individuals and companies engaged in cryptocurrency transactions. This has raised questions over the likelihood of a spot Ethereum ETF approval. The SEC’s view of Ethereum as a security has put the approval process in jeopardy and accusations from the crypto investors that Gensler is deliberately delaying the process.
The SEC’s enforcement division has opted not to charge Ethereum with anything, particularly the sales of ETH being sales of securities. This decision was communicated to Consensys and highlighted as a major win for Ethereum developers, technology providers, and other industry participants.
On 7th June, there was a turning point in the investigation after Consensys sent a letter to the SEC. The letter requested the termination of the investigation since the SEC had recently approved spot Ether ETFs in May. Consensys argued that this approval was based on ETH being classified as a commodity rather than a security. In response, the SEC's letter, shared by Consensys senior counsel Laura Brookover confirmed that the agency does not plan to recommend any enforcement action against Ethereum.
In a recent development, the SEC’s Enforcement Division announced the closure of its investigation into whether Ethereum is a security. On 19th June, this update came to light in a post by Consensys stating that the SEC would not bring charges alleging that sales of ETH constitute securities transactions.
As per CoinGabbar, the decision of the SEC not to proceed with an investigation of Ethereum is positive for Ethereum developers, technology providers, and participants in the industry. As Consensys carries on its legal battle against the SEC, the Ethereum 2. 0 investigation greatly reduces the significant regulatory burden on the cryptocurrency. This development not only helps to determine the legal status of Ethereum but can also be a signal for the approval of the long-awaited spot Ethereum ETF, which will positively affect the crypto market. All the attention is still on the SEC further actions of the legal proceedings.
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