Is Ethereum Classified as a Security? Reports of Ongoing SEC Investigation

Amidst growing scrutiny and regulatory probes, the cryptocurrency Ethereum finds itself at the heart of a significant investigation by the United States Securities and Exchange Commission.

With the SEC delving into the operational aspects and classification of Ethereum, especially following its transition to Proof of Stake (PoS), the entire crypto landscape watches closely.

The outcome could reshape the regulatory and operational frameworks for cryptocurrencies in the U.S. and beyond.

SEC Investigates Ethereum Foundation and Related Companies

Reports have surfaced suggesting that the United States Securities and Exchange Commission (SEC) may be investigating whether the cryptocurrency Ethereum (ETH) qualifies as a security.

The genesis of these reports was a note on the Ethereum Foundation's GitHub page in February of this year, indicating that it was undergoing a voluntary investigation by an authority, hinting at a possible probe by regulatory bodies into the Ethereum Foundation.

Adding to this, on the 21st of this month, Fortune released an article stating that the SEC is investigating cryptocurrency companies as part of its inquiry into Ethereum.

The report, which cites information from companies that have received subpoenas from the SEC, suggests that the agency is engaged in activities to classify Ethereum as a security.

Investigation Following Ethereum's Transition to PoS

It is reported that the SEC's investigation into Ethereum began shortly after Ethereum transitioned to Proof of Stake (PoS) in September 2022.

The SEC has reportedly requested the submission of documents and financial records related to interactions with the Ethereum Foundation from related companies.

SEC Chairman Gary Gensler had stated in 2018 that cryptocurrencies like BTC and ETH do not qualify as securities. However, there has been a viewpoint that cryptocurrencies adopting PoS could be more likely classified as securities.

This has led to speculation that the SEC might now be considering classifying Ethereum as a security.

In the United States, applications for a physical Ethereum ETF are currently underway, with a decision expected around May 2024. Should ETH be deemed a security, it could significantly impact the decision regarding the physical ETF.

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