Regulatory Fog Remains as SEC Chief Doesn't Mention Ethereum as a Commodity, Does Not Say Bitcoin is the Only One Either
Ethereum (ETH) advocates have reacted after the United States Securities and Exchange Commission (SEC) Chairman Gary Gensler refrained from labeling the coin a commodity – and instead chose to name bitcoin (BTC) among the tokens the SEC chiefs before him deemed a non-security. He, however, contrary to many reports, did not single out bitcoin as 'the only' commodity.
In an interview with CNBC’s Jim Cramer, Gensler stated:
“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 stated that "bitcoin and hundreds of other tokens" are a part of a "highly speculative asset class." He further added that some “crypto financial assets have the key attributes of a security,” saying that in the case of many tokens, “the investing public is hoping for a return” on their stakes.
He argued that,
"Right now, you have hundreds, if not thousands, of these crypto tokens that have the basic attributes of raising money from the public, and having a group of entrepreneurs that you might have on your show, saying, 'Come hither, we've got a good idea for you'. And that's okay in America if you comply with the laws, and we've got, unfortunately, a lot of projects that are non-compliant."
ETH enthusiasts are hoping to win converts to their cause when the network finally undergoes the Merge that will see it become a proof-of-stake (PoS) protocol. The Merge could take place in August, and optimistic community members have hoped that moving away from a more energy-intensive mining protocol could help the coin’s reputation.
But a fresh dose of regulatory uncertainty will come as a possible blow to ETH advocates.
Although Gensler did not mention Ethereum by name, his failure to do so has still raised eyebrows – particularly in light of watershed comments in 2018 from William Hinman, then the SEC’s director for the Division of Corporation Finance. Hinman stated that both ETH and BTC needed to be classified as commodities as each was “sufficiently decentralized.”
Under American law that dates back to the 1930s, all assets classed as securities must be registered with the SEC prior to sale. Assets that classify as commodities are instead subject to regulation by the Commodity Futures Trading Commission, which polices financial products such as derivatives.
On Reddit, a user shared a video of Gensler speaking about ETH reportedly prior to his appointment as SEC Chairman. In the video, Gensler made reference to the so-called Howey Test (used in a landmark 1940s Supreme Court case to determine if a transaction qualified as an investment contract).
“I think Ether, when it was done in 2014, would pass this test. When I say pass, it means it’s a security.”
One Redditor opined that Gensler, regardless, “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.”
Another claimed that the “XRP lawsuit” was likely the main reason for Gensler’s comments, adding:
“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.”
Bitcoin supporters buoyed
Many BTC advocates were – by contrast – buoyed by what they perceived as an affirmation that the SEC chief considers bitcoin to be a commodity.
These included Eric Weiss, the Founder of the Blockchain Investment Group. He remarked on Twitter that Gensler was the “second consecutive” SEC Chair to “declare that bitcoin is a commodity” – which makes it “all but impossible for this classification to be altered in the future.” The comments were “very significant indeed,” Weiss opined.
Michael Saylor, the co-founder and CEO of MicroStrategy and a prominent BTC advocate, claimed that “commodity” status was “essential for any treasury reserve asset” – and urged the government to “support bitcoin as a technology.”
That said, importantly, other online commenters are noting that Gensler did not at any point in this interview name bitcoin as 'the only' commodity, stressing the "some, like Bitcoin" part.
"What Gerry Gensler is saying, is that yes Bitcoin has been treated so far as a commodity, and that SOME coins, tokens outside of Bitcoin MIGHT BE commodities," a Redditor wrote.
Either way, the market wasn't impressed with what the SEC chief had to say.
At 8:08 UTC on Tuesday morning, BTC was down 2.2% in a day and up 1.4% in a week, trading at USD 20,920. At the same time, ETH was down 1.6% in 24 hours and 7% in 7 days, chancing hands at USD 1,211.
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