ETH might be classified as a security after switching to POS

Abiky

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Quote from: zasad@ on September 22, 2022, 11:49:57 AM

Ethereum is already maximally centralized and researched by blockchain analysts. Ripple and Ethereum are different, so the trial can be very long. But I don't think that will happen, because Ethereum has a very large lobby in the financial sector.

At least, Ethereum is not as centralized as Ripple (XRP) is. But that still won't exclude it from being classified as a security by the SEC. Everything will depend how much power is given to the validators on the network. If the ones controlling most of the tokens on the Blockchain are exchanges and centralized service providers, then you can bet the SEC will be on such entities' tails to enforce securities laws. That won't apply to private individuals, though.

We're going to have to see how regulations will be applied to the rapidly-evolving crypto/Blockchain space. If somehow ETH becomes compromised, then we would have no choice but to switch to "Plan B" by using a PoW fork like Ethereum Classic (technically, it's the original version of the ETH blockchain). No one knows what will happen in the future, so we can only hope for the best. Just my thoughts Grin

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Quote from: Abiky on September 17, 2022, 07:19:57 PM

SEC chairman Gary Gensler hinted the possibility of classifying all PoS cryptocurrencies as a security. ETH would be not be exempt from this, after switching to the PoS consensus algorithm. With centralization issues mounting on the ETH blockchain, I wouldn't be surprised if exchanges (mainly Coinbase and Kraken) would be required to comply with securities laws in order to provide staking services to their customers. This could also affect Vitalik Buterin (ETH's founder), especially when the project held an ICO in its early days. For what I know, all options are on the table. But rest assured that if the SEC takes action against ETH, it'll be the end of a decentralized web as we know it. Maybe ETC will take over if ETH fails?

What do you think about this? Will the SEC be able to successfully classify ETH as a security? If not, why? If securities laws are enforced, will that make ETH more centralized? Your input will be greatly appreciated. Thank you very much.

Ethereum is already maximally centralized and researched by blockchain analysts. Ripple and Ethereum are different, so the trial can be very long. But I don't think that will happen, because Ethereum has a very large lobby in the financial sector.

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Quote from: tygeade on September 21, 2022, 01:08:04 AM

Quote from: AnonBitCoiner on September 20, 2022, 01:42:34 PM

The people commenting with BTC: BTC is proof of work. This has come because ETH has become PoS after the Merge. Unless BTC does the same, highly unlikely, that there should be no SEC or other issues. If Johny transacts with Pete, both in the US, the transaction is under US jurisdiction. Otherwise, no.

I still think even that wouldn't be under SEC for sure, it will be done via exchanges like coinbase or crypto.com and that means every move you do is already followed, I do not think that anything more is needed like securities.

XRP was tried as security considering how we are literally paying for them to continue their business, they need people to do transactions to keep the chain going so they can use it to help banks or other financial places to move money around the world and we all know that's SEC business, and even they didn't get any trouble. So, there is absolutely no possible way for ETH to become a security neither, it will go on like usual.

Unfortunately, there are talks about it in the SEC even if it is not serious, they are considering it because you are making an interest and SEC doesn't want us to be enemies with FED, because FED is increasing rates and anyone who would see that ETH is paying out better and it could go up in value as well compared to USD which will only lose value, that means we are going to face a big trouble for sure. That is why I believe that we should be comparing the situation to a risk factor, and right now we have that risk from SEC.

Not saying it will happen, but it is true that they are looking into it, even if we dislike the fact, it is a fact and we cannot change it.

Abiky

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Quote from: FinneysTrueVision on September 18, 2022, 08:39:05 PM

ETC has very little developer activity so it is unrealistic that it will take over.

Centralized staking services such as Coinbase face the highest risk of being regulated as securities. For decentralized staking you could argue that users are being compensated for providing security to the network and this does not meet the criteria of being a security.

That's certainly true, mate. But there's nothing stopping ETC from reaching the top if developers become interested in it. There's been a lot of criticism surrounding ETH's new consensus algorithm (especially that it sacrifices decentralization in favor of cost-efficiency), so it's likely PoW chains (with the exception of ETHW) will gain massive traction soon. Regarding securities laws, I think centralized exchanges and staking services would be the ones required to comply. Stakers (validators) earning rewards in a decentralized manner would be exempt from this. If the government does otherwise (enforcing securities laws on decentralized protocols/networks), then crypto advocates would challenge its actions within a court of law.

Just because the US government succeeded taking down Tornado.Cash (even though smart contracts are alive), doesn't mean that it will be successful at enforcing securities laws within decentralized cryptocurrencies. We're going to have to see whenever ETH will succeed or ultimately fail in the long run. Who knows what the US government's next move will be? Just my thoughts Grin

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Quote from: AnonBitCoiner on September 20, 2022, 01:42:34 PM

The people commenting with BTC: BTC is proof of work. This has come because ETH has become PoS after the Merge. Unless BTC does the same, highly unlikely, that there should be no SEC or other issues. If Johny transacts with Pete, both in the US, the transaction is under US jurisdiction. Otherwise, no.

SEC can bend their rules if they wanted to go after BTC, but they didn't because it is POW.

For Ethereum, this is still in the gray area, but who knows what the SEC thinks, they've already classified a lot of atlcoins in the past as security hence they go after them. But this is going to be a game changer because it it ETH that they are going to target because it moves to POS and so they might classified it as security. It's a prime mover so it will have a bigger repercussions in crypto market.

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Quote from: AnonBitCoiner on September 20, 2022, 01:42:34 PM

The people commenting with BTC: BTC is proof of work. This has come because ETH has become PoS after the Merge. Unless BTC does the same, highly unlikely, that there should be no SEC or other issues. If Johny transacts with Pete, both in the US, the transaction is under US jurisdiction. Otherwise, no.

I still think even that wouldn't be under SEC for sure, it will be done via exchanges like coinbase or crypto.com and that means every move you do is already followed, I do not think that anything more is needed like securities.

XRP was tried as security considering how we are literally paying for them to continue their business, they need people to do transactions to keep the chain going so they can use it to help banks or other financial places to move money around the world and we all know that's SEC business, and even they didn't get any trouble. So, there is absolutely no possible way for ETH to become a security neither, it will go on like usual.

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Quote from: Uruhara on September 19, 2022, 04:11:41 PM

very likely. but that won't be happening anytime soon. because there's a lot the SEC has to do. but ETH is more likely to have government backing someday. because it is considered environmentally friendly.

IMO if SEC will pay attention to this in the future.I know that so well if ethereum have been raising the funds to funding the project a few years ago. This may make ethereum to be classified as security as well but again howey test is actually needed and SEC will be doing it once they wanna try to determine whether that's a security or not. that's it.

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Quote from: AnonBitCoiner on September 20, 2022, 01:42:34 PM

The people commenting with BTC: BTC is proof of work. This has come because ETH has become PoS after the Merge. Unless BTC does the same, highly unlikely, that there should be no SEC or other issues.

Care to explain this further?

It looks like what you're saying is that SEC won't go after POS if Bitcoin switch to POS. Is that it? I doubt that but that could become an interesting case since there were no premined coins or crowdfunding unlike what Ethereum did.

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If Johny transacts with Pete, both in the US, the transaction is under US jurisdiction. Otherwise, no.

The problem is that SEC counterpart in other countries follows the footstep of US.

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The people commenting with BTC: BTC is proof of work. This has come because ETH has become PoS after the Merge. Unless BTC does the same, highly unlikely, that there should be no SEC or other issues. If Johny transacts with Pete, both in the US, the transaction is under US jurisdiction. Otherwise, no.

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Quote from: Abiky on September 17, 2022, 07:19:57 PM

...What do you think about this? Will the SEC be able to successfully classify ETH as a security? ..

Watching the battles between the SEC and Ripple over the recognition of XRP as a security, which by the way has not yet been completed, we can say for sure that it will be difficult for the SEC to recognize ETH as a security until a precedent is set. So now a lot depends on what decision the court will make regarding the recognition of XRP as a security.

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Quote from: Abiky on September 17, 2022, 07:19:57 PM

SEC chairman Gary Gensler hinted the possibility of classifying all PoS cryptocurrencies as a security. ETH would be not be exempt from this, after switching to the PoS consensus algorithm. With centralization issues mounting on the ETH blockchain, I wouldn't be surprised if exchanges (mainly Coinbase and Kraken) would be required to comply with securities laws in order to provide staking services to their customers. This could also affect Vitalik Buterin (ETH's founder), especially when the project held an ICO in its early days. For what I know, all options are on the table. But rest assured that if the SEC takes action against ETH, it'll be the end of a decentralized web as we know it. Maybe ETC will take over if ETH fails?

What do you think about this? Will the SEC be able to successfully classify ETH as a security? If not, why? If securities laws are enforced, will that make ETH more centralized? Your input will be greatly appreciated. Thank you very much.

This is what SEC have been trying to do for so long and with this consensus change into PoS it will become more reasons for SEC to finally impose ETH into security. However, SEC will still need sometimes to finally make the decision, the problem if SEC does not classify ETH as security then it will deny it's own decision that said XRP is a security, and it will not be good image for them.

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Eth POW and Eth POS are two different things now. They do have a point and I'd love this to be discussed with authorities too...but SEC should probably defer any move against POS coins and focus all their attention to the Ripple and XRP case hehe.

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very likely. but that won't be happening anytime soon. because there's a lot the SEC has to do. but ETH is more likely to have government backing someday. because it is considered environmentally friendly.

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IIRC, Ethereum was already considered as a commodity back then, even though, it getting scrutiny by some people who thought that Ethereum should've fallen into security, not a commodity. Michael Saylor is one of the examples who also thought all Proof of stake cryptocurrencies should be considered as a security.

Right now, seems those US figureheads taking a closer look into it again due to the recent consensus change. I think that this time, Ethereum will not get away to be inspected again whether it is now could likely be categorized as a security or not.

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The SEC needs more testing before making a final decision. 2019 SEC also asserted that ETH is not a security after rigorous tests and unfortunately this time after ETH was upgraded to POS again, the SEC has reconsidered its statement in the past. If they assert that ETH is a security, it would be contrary to the old claims, this would contradict their statement. But if they declare ETH is not a security then this will be a good reason for XRP, they will protest against the SEC. The SEC needs to do some research to come up with concrete evidence and arguments to avoid trouble in this case.

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Quote from: Abiky on September 17, 2022, 07:19:57 PM

SEC chairman Gary Gensler hinted the possibility of classifying all PoS cryptocurrencies as a security. ETH would be not be exempt from this, after switching to the PoS consensus algorithm. With centralization issues mounting on the ETH blockchain, I wouldn't be surprised if exchanges (mainly Coinbase and Kraken) would be required to comply with securities laws in order to provide staking services to their customers. This could also affect Vitalik Buterin (ETH's founder), especially when the project held an ICO in its early days. For what I know, all options are on the table. But rest assured that if the SEC takes action against ETH, it'll be the end of a decentralized web as we know it. Maybe ETC will take over if ETH fails?

What do you think about this? Will the SEC be able to successfully classify ETH as a security? If not, why? If securities laws are enforced, will that make ETH more centralized? Your input will be greatly appreciated. Thank you very much.

Honestly the SEC can move the goalposts anytime they want to make it work for them. Will they classify PoS coins as securities, no clue. I have read too much into the reasons that would make them classify them as such but if they did eth pricing could see a massive hit in the short term.

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ETC has very little developer activity so it is unrealistic that it will take over.

Centralized staking services such as Coinbase face the highest risk of being regulated as securities. For decentralized staking you could argue that users are being compensated for providing security to the network and this does not meet the criteria of being a security.

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By switching to POS, the investors who believed in decentralization as the most important in crypto recognized ETH as compromised. Gensler considers all cryptocurrencies to be securities and are operating illegally if they are not registered with SEC. Except for BTC.

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https://www.wsj.com/articles/ethers-new-staking-model-could-draw-sec-attention-11663266224
Securities and Exchange Commission Chairman Gary Gensler said Thursday that cryptocurrencies and intermediaries that allow holders to “stake” their coins might pass a key test used by courts to determine whether an asset is a security. Known as the Howey test, it examines whether investors expect to earn a return from the work of third parties.

“From the coin’s perspective…that’s another indicia that under the Howey test, the investing public is anticipating profits based on the efforts of others,” Mr. Gensler told reporters after a congressional hearing. He said he wasn’t referring to any specific cryptocurrency.

Howey test is a test you wanna fail if you don't wanna be regulated by SEC.

Abiky

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SEC chairman Gary Gensler hinted the possibility of classifying all PoS cryptocurrencies as a security. ETH would be not be exempt from this, after switching to the PoS consensus algorithm. With centralization issues mounting on the ETH blockchain, I wouldn't be surprised if exchanges (mainly Coinbase and Kraken) would be required to comply with securities laws in order to provide staking services to their customers. This could also affect Vitalik Buterin (ETH's founder), especially when the project held an ICO in its early days. For what I know, all options are on the table. But rest assured that if the SEC takes action against ETH, it'll be the end of a decentralized web as we know it. Maybe ETC will take over if ETH fails?

What do you think about this? Will the SEC be able to successfully classify ETH as a security? If not, why? If securities laws are enforced, will that make ETH more centralized? Your input will be greatly appreciated. Thank you very much.

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