Ethereum wins a phased victory in SEC investigation, U.S. regulatory winds may change

Author: Mia, ChainCatcher

Editor: Marco, ChainCatcher

Following the approval of the Ethereum ETF, Ethereum once again won a staged victory in the public eye.

On June 19, Ethereum infrastructure development company Consensys posted on social media: "We are pleased to announce that Ethereum developers, technology providers and industry participants have achieved a major victory: the U.S. Securities and Exchange Commission (SEC) The SEC’s Enforcement Division informed us that it is closing its investigation into Ethereum 2.0. This means that the SEC will not file charges that the sale of ETH was a securities transaction.”

This 14-month investigation has finally come to an end. A satisfactory progress.

SEC investigation from beginning to end

According to people familiar with the matter, the investigation began in September 2022, shortly after ETH was transferred to POS.

When the ETH blockchain moves to “Proof-of-Stake,” Ethereum moves away from the energy-intensive model used by Bitcoin and instead adopts a model that relies on a network of trusted validators and gives the SEC a new excuse to try Define Ethereum as a security.

In this regard, a spokesperson for ConsenSys said: "If you look at Director Hinman's speech in 2018, you will understand. At that time, he said that Ethereum was not a security. He did not use PoW or PoS as a basis, and the consensus mechanism is irrelevant."

As early as 2018, William Hinman, then director of the SEC’s Financial Department, gave an important speech making it clear that Ethereum was not considered a security. Current SEC Chairman Gary Gensler, before serving as SEC Chairman, also testified before Congress that ETH is not a security.

The sudden investigation undoubtedly triggered public controversy and pushed the SEC to the forefront.

Major crypto leaders began to publicly criticize the SEC.

Coinbase Chief Legal Officer paulgrewal.eth once posted on social media that millions of Americans hold ETH. Since its launch in 2015, ETH has been crucial to the cryptocurrency field. ETH is a commodity, not a commodity. A security, and this is the position the SEC has taken for years, the SEC has no good reason to reject the ETH ETF application.

The premise for the approval of ETH ETF is the assumption that ETH is a commodity. With the approval of the application for ETH ETF in May this year, the commodity attribute of ETH has been proven again, which also means that the agency will end its investigation of Ethereum 2.0. This also makes this investigation even more "nonsensical."

SEC seemed to be aware of this and eventually gave up the investigation.

SEC Goes Moderate

Since Gary Gensler took office, the SEC seems to have been regarded as the “public enemy of the crypto world”.

Whenever the SEC investigates or takes action against certain projects or well-known individuals, the market will often fluctuate as a result, and even lead to a market decline.

From April 2021 to now, Gary Gensler has served as Chairman of the SEC for more than half of his term. During his tenure, Gary Gensler led cases against many well-known crypto companies, including Binance, Coinbase, Kraken, and FTX. Issues involved in these cases include market manipulation, unregistered securities offerings, and violations of anti-money laundering regulations. These actions have caused crypto companies to feel unprecedented regulatory pressure, and have also triggered discussions in the industry on the scale and scope of regulation.

As time goes by, encryption users seem to have become immune, and the SEC’s attitude towards encryption seems to be softening amid the hard work in the encryption industry.

Facing controversy and doubts, Gary Gensler and the SEC are also working hard to adjust their regulatory strategies and remarks. They began to pay more attention to communication and cooperation with the encryption industry, trying to find a regulatory method that can not only protect the rights and interests of investors but also promote market development.

While “rectifying” the crypto industry, the SEC has been working on the integration of crypto finance and traditional finance.

In January this year, the Bitcoin spot ETF was listed; in May, the SEC also approved the 19 b-4 filing of the Ethereum spot ETF. These two events promoted the integration of the encryption industry and mainstream finance.

Regarding the recent mild measures taken by the SEC in the field of encryption, Hong Kong blockchain lawyer Wu Wenqian believes that "the SEC's regulatory attitude seems to be changing."

Lawyer Wu said, “Last month, the SEC officially adopted the decision of the 19 b-4 document of the Ethereum spot ETF. Although there is still some controversy over whether ETH is a security legally, this move undoubtedly brings benefits to the cryptocurrency industry. A hint of warmth. Although this decision to withdraw the investigation may not have direct legal implications for regulatory transparency and consistency, it is undoubtedly regarded as an important signal for a possible change in regulatory direction

. With the U.S. election approaching this year, there may indeed be a major change in policy direction. Against this background, the SEC’s adjustment in its regulatory attitude toward cryptocurrency may herald a more open and inclusive regulatory environment for the cryptocurrency industry in the future. It is undoubtedly a positive sign worth looking forward to.”

On June 20, Forbes business reporter Eleanor Terrett revealed that Consensys founder Joseph Lubin said that the company still plans to continue to advance the lawsuit. “The SEC’s decision to end its 14-month investigation into Ethereum is a welcome development— — It’s necessary, but not enough. There must be better ways to regulate the market than raids. We hope that some U.S. regulators will start to become less confrontational about cryptocurrencies, and that national investor protection strategies will evolve from the current guerrilla tactics. Come out. Until then, we will continue our lawsuit against the SEC in Texas as we work to fight for more legal clarity for everyone.”

In the face of a wildly growing crypto community, Corresponding supervision and adjustment are undoubtedly the only way to go.

As Lubin said, only by clearly defining the scope and scale of supervision through legal means can we truly promote the healthy development of the crypto industry while protecting the legitimate rights and interests of investors. Regulators and the crypto industry should find better ways to regulate the market. rather than a surprise inspection.

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