Original author: Mia, ChainCatcher
Original editor: Marco, ChainCatcher
Following the approval of the Ethereum ETF, Ethereum has once again won a phased victory in the public eye.
On June 19, Ethereum infrastructure development company Consensys posted on social media: “We are pleased to announce a major victory for Ethereum developers, technology providers, and industry participants: the U.S. Securities and Exchange Commission (SEC) Enforcement Division has notified us that it is ending its investigation into Ethereum 2.0. This means that the SEC will not bring charges that the sale of ETH is a securities transaction.”
The 14-month investigation has finally come to an end with a satisfactory result.
SEC Investigation
According to people familiar with the matter, the investigation began shortly after ETH switched to POS in September 2022.
When the ETH blockchain moved to proof-of-stake, Ethereum moved away from the energy-intensive model used by Bitcoin and adopted a model that relies on a network of trusted validators, giving the SEC a new excuse to try to define Ethereum as a security.
In response, a ConsenSys spokesperson said: “If you look at Director Hinman’s speech in 2018, you will understand that when he said Ethereum was not a security, he did not use PoW or PoS as a basis, and the consensus mechanism was irrelevant.”
As early as 2018, William Hinman, then director of the SEC’s Financial Division, made an important speech, clearly stating that Ethereum is not considered a security. Current SEC Chairman Gary Gensler, before becoming SEC Chairman, also testified in Congress that ETH is not a security.
The sudden investigation undoubtedly sparked public controversy and put the SEC at the center of attention.
Major crypto leaders began publicly criticizing 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 security. This is also the position that the U.S. Securities and Exchange Commission has taken for many years. The SEC has no sufficient 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 ETH ETF application in May this year, the commodity attributes of ETH have been proven again, which also means that the agency will end its investigation into Ethereum 2.0, which makes this investigation even more ridiculous.
The SEC seemed to realize this and eventually dropped its investigation.
SEC moves toward moderation
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 tends to fluctuate and even lead to a round of decline.
Gary Gensler has been in office as SEC Chairman since April 2021. During his tenure, Gary Gensler has led cases against many well-known crypto companies, including Binance, Coinbase, Kraken, and FTX. These cases involve issues such as market manipulation, unregistered securities issuance, and violations of anti-money laundering regulations. These actions have put crypto companies under unprecedented regulatory pressure and triggered discussions in the industry about the scale and scope of regulation.
As time goes by, crypto users seem to become immune, and the SECs attitude towards crypto seems to have become more moderate amid the soft and hard persuasion of the crypto industry.
Faced with controversy and doubts, Gary Gensler and the SEC are also working hard to adjust their regulatory strategies and statements. They are beginning to pay more attention to communication and cooperation with the crypto industry, trying to find a regulatory approach that can both protect the rights of investors and 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 crypto industry and mainstream finance.
Regarding the SEC’s recent moderate measures in the crypto space, Hong Kong blockchain lawyer Wu Wenqian believes that “there seems to be a sign of a change in the SEC’s regulatory attitude.”
Attorney Wu said, “Last month, the SEC officially approved the 19 b-4 filing for the Ethereum spot ETF. Although there is still some controversy as to whether ETH is a security in law, this move has undoubtedly brought a glimmer of warmth to the cryptocurrency industry. Although the decision to withdraw the investigation may not have direct guiding significance for the transparency and consistency of supervision in law, it is undoubtedly regarded as an important signal that the direction of supervision may change.
Considering the upcoming US election this year, there is indeed a possibility of a major change in policy direction. In such a context, the SECs adjustment of its regulatory attitude towards cryptocurrencies may herald a more open and inclusive regulatory environment in the future. For the cryptocurrency industry, this is undoubtedly a positive signal worth looking forward to.
On June 20, Forbes business reporter Eleanor Terrett revealed that Consensys founder Joseph Lubin said the company still plans to proceed with 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 a better way to regulate the market than raids. We hope that some U.S. regulators’ adversarial sentiment toward cryptocurrencies will begin to wane, and that national investor protection strategies will evolve from current guerrilla tactics. Until then, we will continue our lawsuit against the SEC in Texas because we are committed to fighting for more legal clarity for everyone.”
Faced with the wildly growing primitive crypto society, corresponding supervision and adjustment are undoubtedly the only way forward.
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 surprise inspections.