The potential classification of Ethereum (ETH) as a security by the United States Securities and Exchange Commission (SEC) has sparked a series of debates within the crypto community. According to a report from Fortune, the SEC is taking steps to legally classify ETH as a security and has subpoenaed several U.S. crypto businesses as part of its ongoing investigation into Ethereum. This move could jeopardize the chances of the SEC approving an exchange-traded fund (ETF) for Ethereum this year, similar to what it did for Bitcoin.
The report has garnered reactions from various influential figures in the United States. Congressman Patrick McHenry, Chairman of the House Financial Services Committee, criticized the SEC’s actions, stating that it contradicts the commission’s previous views on ETH and the assessment of the Commodity Futures Trading Commission (CFTC). McHenry emphasized that the jurisdiction and budget decisions lie with the United States Congress and accused SEC Chair Gary Gensler of making decisions arbitrarily.
It is worth noting that the SEC’s actions are seen as a challenge to the CFTC’s stance on Ethereum, with the CFTC considering ETH a commodity rather than a security. Fox Business journalist Eleanor Terrett believes that if the SEC succeeds in classifying ETH as a security, it would indirectly undermine the CFTC, which is its sister agency.
The recent actions taken by the SEC contradict its previous stance on Ethereum. In 2018, the SEC declared ETH a non-security, based on the argument that it is sufficiently decentralized. Since then, the SEC has not labeled ETH as a security in any lawsuits against U.S.-based crypto businesses.
Several developments may have influenced the SEC’s shift in stance. Ethereum’s transition from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus algorithm and the New York Attorney General’s Office labeling ETH as a security in a lawsuit against KuCoin could have played a role. Additionally, the SEC granted Prometheum permission to custody Ethereum as a security.
The question now arises as to whether XRP could overtake Ethereum if the SEC officially classifies ETH as a security. Some crypto enthusiasts speculate that a potential lawsuit against the Ethereum Foundation could impact ETH’s price and create an opportunity for XRP to surpass it. This argument is supported by the fact that the SEC’s legal action against Ripple solidified ETH’s position as the second-largest cryptocurrency by market cap.
However, it remains to be seen whether XRP can indeed surpass Ethereum if the SEC declares ETH a security. Currently, ETH holds the second-largest market cap at $417.6 billion, while XRP sits in sixth place with a valuation of $33 billion.
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