What Does SEC Chief’s Refusal to Comment on Ethereum’s Security Status Signify?

Gary Gensler, the head of the US Securities and Exchange Commission (SEC) recently appeared on CNBC to talk about crypto regulations and how the commission plans to implement rules around the decentralized market. Gensler said regulations would make crypto more accessible and increase its adoption. He also drew an analogy to the automobile industry explaining how government regulations made it safer for people to drive automobiles and increased their adoption.

However, his refusal to comment on whether Ethereum (ETH) qualifies as a security under the Howey Test drew everyone’s attention. Back in 2018, Gensler had claimed that there is a strong case for Ether to be classified as Security.

The refusal by the current SEC chief comes in contrast to the comments made by former SEC head William Hinman who had claimed earlier in his tenure that Ether has become decentralized enough to be deemed as non-security. This statement of Hinman is currently being used by Ripple in its defense in the ongoing lawsuit against the SEC.

Ripple’s legal counsel has argued that just like Ethereum, XRP has also become non-security over time pointing specifically towards Hinman’s comments. SEC on the other hand argued that the comments made by the former chief in a personal capacity cannot be associated with the viewpoint of the commission.

Will Ether be Deemed as Security?

What makes things even more concerning for Ethereum is Gensler’s comments on ICOs. During his recent speech before Aspen Security Forum, Gensler said he agreed with his predecessor Jay Clayton about Initial Coin Offerings (ICOs). Clayton has said all crypto tokens that offered an ICO qualify as a security.

Ethereum also conducted an ICO before the public debut and the recent comments by the SEC chief may brew fresh controversy around its status as an asset class. The controversy also comes at a time when the Ethereum network is set for a massive upgrade. The Ethereum London Hardfork will commence today while the network would transition into Proof-Of-Stake Eth 2.0 by the end of this year or early next year.

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