Regulation
Consensys founder believes cryptocurrency regulatory hurdles are nearing the finish line
On June 19, the U.S. Securities and Exchange Commission (SEC) officially concluded its investigation into Ethereum 2.0 and no longer pursued charges against the sale of Ethereum as securities. Second Joseph LubinCanadian-American businessman and founder of ConsenSys, the landmark decision could be a sign that regulatory hurdles may soon ease.
While the SEC cleared the Ethereum case, the cryptocurrency industry aims to loosen regulations.
“We are hopeful that the antagonism toward cryptocurrencies among some U.S. regulators is starting to wane and that the nation’s investor protection strategy will evolve from current guerrilla tactics,” Lubin shared his thoughts on the SEC’s decision with Eleanor Terrett of FOX Business.
The United States falls behind
The closure of the investigation removed the uncertainty that loomed over Ethereum in recent months. The move follows the SEC’s recent approval of Ethereum spot ETFs, which suggests the regulator’s loose stance on cryptocurrencies.
While Lubin welcomes this development, he believes it is “not enough.” According to him, Consensys’ goal is a more structured regulatory system for cryptocurrencies. “There has to be a better way to regulate the market than through an ambush,” he added. “… we intend to achieve greater legal clarity for everyone.”
According to FOX Business, the SEC’s investigation into Ethereum 2.0 (Ethereum in the Proof-of-Stake era) had been ongoing since March 2023 under the leadership of Gurbir Grewal, director of the SEC’s Division of Enforcement.
In late April, Consensys filed a lawsuit against the SEC to defend itself the Ethereum ecosystem and its product, MetaMask. Consensys argued that Ether, Ethereum’s native token, is a commodity, not a security, and that the SEC has no legal authority to regulate it as such.
Earlier this month, the entity reportedly sent a letter to the SEC to reiterate its arguments. This time, Consensys used the SEC’s recent approval of Ethereum spot ETFs as its point and asked the SEC to drop its investigation into Ethereum 2.0.
His effort was successful. However, the company said it will continue its lawsuit against the Securities Commission to promote clear and fair rules that protect investors.
The focus is now on MetaMask. Consensys says its MetaMask portfolio software does not function as a broker and, therefore, is not subject to SEC regulation.
Lawsuits in progress
Although the SEC has recused itself from its investigation into Ethereum, it is unlikely to abandon lawsuits against other cryptocurrency entities. Yesterday, Kraken, another major exchange facing a lawsuit from the SEC, was in court for its motion to dismiss the SEC’s enforcement action.
The SEC previously said Kraken offered trading in 11 unregistered securities on its platform, including SOL, ADA and ALGO. In February 2024, Kraken filed a motion to dismiss the SEC’s lawsuit, arguing that the cryptocurrencies involved are not securities and that the SEC is overstepping its jurisdiction.
According to the latest developments, a US judge is unlikely to dismiss an SEC lawsuit against Kraken. The judge is skeptical of Kraken’s arguments, citing a similar SEC case against Coinbase that was not dismissed.
In addition to Kraken and Consensys, the SEC filed lawsuits against Coinbase and Binance last year. The main argument is the same; the commission said these exchanges operated in the United States as unregistered stock exchanges, brokers and clearing agencies.
The SEC argues that most cryptocurrencies should be classified as securities, with Bitcoin being a notable exception. SEC Chairman Gary Gensler said the agency will continue to take enforcement action against companies that fail to register their digital assets.
The cryptocurrency industry has criticized the SEC’s approach as overstepping its authority. Advocates and industry figures, including Coinbase CEO Brian Armstrong, argue that the SEC has no legal authority to regulate cryptocurrencies and that the agency’s actions will stifle innovation and drive businesses overseas.