This morning, I woke up to some surprising news about Ethereum. The SEC reviewed its position and now treats cryptocurrency as a commodity. This could be big news for anyone into cryptocurrency and, personally, for me as one who has been following up on Ethereum's journey very closely. For quite some time, the SEC had suspicious eyes on Ethereum, especially after it shifted to proof-of-stake in September 2022. The agency believed that by providing returns through the staking of tokens in its network, PoS gave Ethereum more of a face of security than that of a commodity. The atmosphere is predominantly highly prevailing, with much uncertainty in the market. As someone who believes blockchain technology has great potential to come, this kind of uncertainty frustrates me a lot.
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Things began to change in May when the SEC approved the issuance of spot ETH ETFs. This was quite a bombshell, considering that, traditionally, the SEC had shot down similar requests for even Bitcoin, which has long since been fenced off as a commodity. The green light given to these ETFs now marks the first hint at a possible softening of the SEC's hard stance against Ethereum. We didn't realize it then, but it was a significant paradigm shift; today, we got explicit confirmation of that.
ConsenSys, the company behind MetaMask, announced that the investigation of the SEC's Enforcement Division about Ethereum 2.0 had been closed. This is a clear hint that the SEC no longer treats Ethereum as an unregistered security. Personally, this is an enormous relief and confirmation that Ethereum is receiving the recognition it was due for. The development is vital in removing the legal risks associated with the trading of Ethereum and, hence, making it more accessible and therefore attractive to investors.
The approval of spot ETH ETFs and the closure of its investigation signal wider acceptance for Ethereum. The ruling places Ethereum on a similar regulatory footing as Bitcoin. This recognition is not solely a victory for Ethereum alone, but for the entire cryptocurrency community. That means that finally, the regulatory bodies have begun to grasp and digest the unique characteristics that set the different cryptocurrencies apart.
I also find the timing of this change interesting. This is an election year, and there were numerous doubts about whether the Biden administration would want to antagonize crypto enthusiasts numbering in the millions. The licensing of ETFs might have been a strategic measure to avoid any unwanted conflict with another large voter base. This is where one political spin within the story manifests: how entangled politics and cryptocurrency are getting.
The role of Consensys in this development cannot be understated. As a developer of MetaMask, the most popular Ethereum wallet, they have a huge stake in how it is regulated. They even sent a letter to the SEC seeking clarity on the status of Ethereum, which probably goaded them into making their position clear. It's promising that crypto-based companies are actively working with regulators to create a more stable and predictable environment for stakeholders on every side.
The move by the SEC is a vindication of doggedness and the power of advocacy. Moving Ethereum from being under probe as a security to now being pronounced a commodity is a long journey and one maximalist. What this illustrates is the enormous dynamism existing in the cryptocurrency market and the regulatory bodies getting more mature concerning these new-age assets.