Ethereum's New Staking Model Attracts SEC!
After a long delay, on Thursday, September 15, the Ethereum network was finally transformed into proof-of-stake (PoS) from proof-of-work (PoW). This transition is expected to improve the network’s stability and reduce energy usage by 99.95%.
While the ETH holders are rejoicing with the merger, the US regulator, Securities Exchange, and Commission (SEC) are now viewing ETH as security. Right after the merge was completed, Gary Gensler, SEC Chairman claimed that all the cryptocurrencies and platforms that give an opportunity for its holders to stake their holdings will have to pass the Howey test used by judiciaries to know if the asset is secure. The Howey Test makes an effort to investigate whether the market participants are expecting any returns from the third party.
As per the law that was passed in the 1930s, the one who issues securities, the assets that involve stocks and bonds, should submit a disclosure to the SEC. Also the exchange platforms along with brokers who allow the trading of securities must adhere to the rules meant to protect investors.
Ethereum To Register Under SEC
If the rules aren’t followed, the exchanges and brokers will have to encounter strict liabilities.
Staking is a way through which the crypto networks verify the transactions which allow investors to hold on to their currencies for a time so that they get some returns. The networks include Solana, Cardano, and now Ethereum too.
Even in the past, the SEC has urged that those platforms that are allowing crypto-lending products are required to register with them and when BlockFi Lending went against the claim, they were forced to pay $100 million.
The agriculture committee has recently proposed a crypto bill that especially mentions that Bitcoin and Ethereum are digital commodities and not securities. Exchanges such as Coinbase and FTX will have to register with the Commodity Futures Trading Commission so that the commission can track the trading and defend investors from any kind of abuse.
On the other hand, the judiciary from Consumer-protection claims that the CFTC doesn’t hold the good experience and resources to understand small inventors. Now, the SEC is expected to either draft a disclosure frame or offer incentives for the organizations that make an effort to reduce energy consumption.
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