The U.S. Securities and Exchange Commission (SEC) by its actions and statements is out to bring the cryptocurrency industry to book. Under Gary Gensler’s leadership, the commission has gone all out on crypto sectors such as decentralized finance (DeFi) and cryptocurrency exchanges.
The SEC recently opened an investigation on UniSwap Labs, the developers of the largest Ethereum-based decentralized exchange UniSwap. It also recently threatened to take regulatory action against Coinbase if it went ahead with a planned rollout of its lending product.
However, the longest-standing SEC action against the crypto-industry remains its lawsuit against Ripple. In this case, the SEC has argued that Ripple’s sale of its native token XRP amounted to the sale of an unregistered security. The allegation not only notes Ripple’s direct sales but also resales by XRP holders, to be sales of unregistered securities.
Market observers and pundits following the case have raised alarm over its implications. They have asserted that the case goes beyond just XRP. According to attorney John Deaton, who has championed an XRP holder’s resistance to the SEC’s action against Ripple, should the regulator be successful against Ripple, no other cryptocurrency will be safe. This is because, with one success, they may be motivated to move against other cryptocurrencies as well.
Leading from this, there have been concerns as to which cryptocurrency could become the SEC’s next target. A lot of speculation is that Ethereum could be its next target. This is especially the opinion of XRP advocates who have consistently pointed out that if the SEC could go after Ripple which was not “significantly different” from Ethererum in structure, then it was unfair that Ethererum would get a “free pass.”
One recurring piece of ammunition against Ethereum is a video from 2014 in which Ethereum founder Vitalik Buterin was pitching the Ether presale to would-be investors as a way to get into Ethereum. He also explained that the choice of jurisdiction for launching the ICO was Switzerland because they had a less stringent regulatory environment.
With the proponents arguing that Ether not being considered to be a security is questionable, the SEC may be compelled to re-evaluate the crypto asset. This may be the SEC’s next move either to save face and not look prejudiced or because the observations of market participants are valid and Ether poses a potential danger to consumer protection.
From a legal standpoint, the fears for Ethereum seem to also be efficient. According to Attorney Jeremy Hogan, Ethereum faces a mild threat of being hunted by the SEC going by the Howey Test. He points out that the blockchain has a pivotal organization that not only oversees the network but is also actively involved in establishing capital to build the project.