US Securities and Exchange Commission (SEC) chairman Gary Gensler avoided mentioning Ethereum (ETH) in a recent interview in which he did single out Bitcoin (BTC) as a commodity.
The classification of cryptocurrencies as either a security or a commodity has a knock-on effect to how they are regulated, and by whom.
Since the 1930s, US law has stated that assets classed as securities must be registered with the SEC prior to sale, while those classified as commodities are regulated by the Commodity Futures Trading Commission (CFTC).
Speaking to CNBC’s Jim Cramer, Gensler said: “Some, like bitcoin – and that’s the only one, Jim, I’m going to say, because I’m not going to talk about any one of these tokens, my predecessors and others have said – they’re a commodity.”
Gensler’s failure to overtly label ETH as a commodity has unsettled some ETH advocates, as regulation by the CFTC would provide a greater level of security for the network, which would then avoid issues that have tied Ripple up in protracted litigation with SEC over its XRP token.
In 2018 the SEC’s then director for the Division of Corporation Finance William Hinman said that both ETH and BTC needed to be classified as commodities as each was “sufficiently decentralized”, however this has never been certified officially.
Meanwhile, a Reddit user dug up and shared a video of Gensler, apparently before his appointment to SEC, saying that if the so-called Howey Test (used in a Supreme Court case in the 1940s to determine whether a transaction qualified as an investment contract) was applied to ETH, it would define it as a security.
One Redditor cited the XRP lawsuit as a reason for Gensler steering clear of defining ETH. “One of the main arguments in the XRP lawsuit is the rollout methods and time frame is similar with ETH back in the time period SEC is suing Ripple over. Gensler has to tread light here not to give Ripple more ammo than they already have. [That’s why he is] leaving ETH out of his comments now.”
Another said the SEC boss “probably thinks [ETH] is not a security but it’s a little too close to others in the space to mention it without providing any rationale.”
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