The US Securities and Exchange Commission (SEC) has decided to stop its investigations into whether Ethereum is a security, according to a statement from Consensys. This news is a significant victory for Ethereum developers and industry participants. The SEC’s Enforcement Division has notified Consensys that it is closing the investigation into Ethereum 2.0, which means that there will be no charges alleging that the sale of ETH is a securities transaction.
This decision comes as the SEC is in the final stages of approving spot Ether ETFs. The SEC had previously been looking into whether Ethereum was offering securities illegally after the network transitioned to the Proof-of-Stake (PoS) consensus mechanism. The SEC had also previously stated that every cryptocurrency, except for Bitcoin, was considered a security.
However, the SEC seems to have changed its stance on Ethereum in recent times, as evidenced by this latest development. Consensys had reached out to the agency on June 7 to inquire about its plans regarding charging Ethereum, especially as the approval of Ether ETFs was imminent. The SEC responded to Consensys, indicating that its position is now based on the understanding that ETH is a commodity.
If the SEC had continued its investigations and taken action against Ethereum and its associated services in the US, Consensys would have been significantly impacted. Consensys, which operates MetaMask, offering ETH swaps and staking services, had received a Wells Notice from the SEC, along with other service providers, for allegedly engaging in illegal broker-dealer activities involving ETH.
In response, Consensys filed a lawsuit against the SEC, arguing that the regulator’s actions were unfair and aimed at controlling the industry and stifling innovation. In its court filing on April 25, Consensys warned that the SEC’s overreach could have disastrous consequences for the Ethereum network and Consensys as a company. The lawsuit is still ongoing.
Overall, the decision by the SEC to drop its investigations into Ethereum as a security is a positive development for the Ethereum community and the broader cryptocurrency industry. It provides clarity and regulatory certainty for developers, technology providers, and industry participants involved with Ethereum. The ongoing lawsuit between Consensys and the SEC will likely continue to shed light on the regulatory environment surrounding cryptocurrencies in the US.