Topic: Gary, tell us what is Ethereum? (Read 583 times)

Thanks for sharing. But I don't quite understand their idea. "Other category" of what? Is it supposed to be another category of securities, or something other than securities/commodities? The latter would make much more sense, but now the question would be if it's not security nor commodity, would it be outside of SEC's jurisdiction? If so, would it require the creation of a separate regulatory body? Because I don't think this is likely to happen. And if SEC was to keep their authority over crypto despite them not being securities - then it's just handing them an extra powers, which is not something I am in favour of.

Ethereum Redefined: JPMorgan Proposes Unique Categorization:
"As the digital currency landscape continues to evolve, it has become evident that the Securities and Exchange Commission (SEC) and other U.S. regulatory bodies are eager to redefine the government’s approach to regulating cryptocurrencies. However, despite the SEC’s lawsuits against Binance and Coinbase and calls for SEC restructuring from the Grand Old Party (GOP), a clear way forward still seems distant. Adding to the complexity gripping the blockchain industry, a team of JPMorgan strategists led by Nikolaos Panigirtzoglou has suggested that Congress place Ethereum (ETH) in a new “other category” instead of the rigid classifications proposed by the SEC for tokens like MATIC, SOL, ALGO, and others."

Because it's all about the power, not about protecting investors. By doing that, SEC would be reducing their power. Without clear rules, they have a power to strike at any time at any crypto, or the entire industry if they wish to.


Sadly, the crypto industry has no strong lobby and is politically irrelevant. But even if they were, as SEC is deemed an independent body, Gensler's position is pretty safe, as long as he doesn't go against the SEC's Commissioners (who appointed him).

Moreover, SEC's actions are in line with the current administration's crackdown on crypto, known as "Operation Choke Point 2.0".

Hell, why don't they make some framework on what makes a crypto a security in the United States (the Howey Test is not specific enough)?

This kind of waffling is really going to end badly for Gensler and the SEC since basically the entire crypto industry has turned on them.

Why can't he just make up his mind, considering that he has no problem listing a slew of other cryptos as securities.

Hell, why don't they make some framework on what makes a crypto a security in the United States (the Howey Test is not specific enough)?

This kind of waffling is really going to end badly for Gensler and the SEC since basically the entire crypto industry has turned on them.

Instead of fighting scams they are busy debating what is a security or not. Cybercriminals win.

McHenry asked Gensler some very specific questions, including this one, regarding Ether (ETH), the native token of the Ethereum blockchain.

“Clearly an asset cannot be both a commodity and a security. Do you agree?”

“Ummm, I… I… it’s… actually all securities are commodities under the Commodity and Exchange Act, it’s that we’re excluded commodities, but I would agree that a security cannot also be an excluded commodity and an included commodity, I’m sorry chair, just to talk about the Commodity Exchange Act, more precisely.”

I recently found this information. The SEC has been interpreting the law to their advantage for many years. Let's see what happens with this petition.

https://in.investing.com/news/cci-files-an-amicus-brief-on-sec-seeking-response-to-coinbases-petition-3641431
"Though receiving five rulemaking petitions from Coinbase over the past 5 years, SEC ignored responding for their Securities and Exchange Act clarity. So far, there is no proper approach initiation to rulemaking policies from SEC. By withholding the petition, SEC thwarts the regulation-by-enforcement actions awarding judicial review.

Seeking Clarity From SEC

Since the SEC lacks regulatory clarity, several U.S.-based organizations might shift their jurisdictions with the clarified frameworks to other countries possibly. Meanwhile, the countries like European Union (EU) and the United Kingdom (UK) work towards the active participation of technical leadership seeking foster innovation and safeguard market participants. To mention, the EU has cleared the ‘Markets in Crypto Act’ recently. "

Coinbase is also active in expanding its overseas operations, the question is whether they do that just to grow, or as a hedge against a potential heavy crypto crackdown in the US.

/tinfoil hat on/ Could it be that it's all just a show to kill off competition and make sure that no foreign entity (especially Binance) gets any significant share of the crypto market?

Coinbase is also active in expanding its overseas operations, the question is whether they do that just to grow, or as a hedge against a potential heavy crypto crackdown in the US.

And I wouldn't say they're doing that great. In the first quarter of 2023, they recorded an operating loss of £124m and a net loss of $79m. Unless we look at their (non-statutory) adjusted EBITDA, which is looking pretty good: +$284m Vs. +$20m (first quarter of 2022).

I don't think anything will happen on March 13th.
Unlike competitors who are closing business in the US, the Coinbase exchange is doing great. It is a fact.
If the Coinbase exchange is sued, then this is a different situation, but for now, the SEC has rid Coinbase of competitors in the USA

No idea how this is going to unfold, but I think there's a zero chance the SEC will provide any clear rules. I expect they'll either provide a vague response, or just won't respond at all. What's the worst that could happened to them if they don't? They get fined and pay with tax payers' money?
Anyhow, they have time till 13th May, so only 2 days from now.
Apparently, some crypto-groups are piling in in support of Coinbase:
https://www.coindesk.com/policy/2023/05/11/coinbases-sec-complaint-draws-allies-depicting-us-regulator-as-crypto-bully/

and here's the Coinbase's petition:
https://www.sec.gov/rules/petitions/2022/petn4-789.pdf

I thought that the SEC would not respond to the petition without the decision of the Court. I do not want to rush things, but I do not understand how the SEC will clarify its position in 10 days?

What do you mean by rejected the petition? I believe the court has ordered SEC to provide response to Coinbase:
https://www.coindesk.com/business/2023/05/04/us-court-orders-sec-to-respond-to-coinbase-allegations-within-10-days/
I don't think they have responded already, at least I can't find any info on that. And if they provide an official response but fail to clarify anything (not sure if they can do it), then, I'd imagine it would work in favour of Coinbase, should SEC decide to start a lawsuit against them.
Some lawyers already predict that SEC will lose in court:
https://news.bitcoin.com/lawyer-expects-sec-to-lose-if-it-sues-coinbase-due-to-fatal-flaw-of-gary-genslers-own-making/

Ripple will have spent $200 million fighting SEC lawsuit, CEO says

The SEC rejected the petition of the Coinbase exchange, and what will the exchange achieve from the court's decision?
SEC will provide a formal answer, in which there will be no clear information.This won't stop the SEC from terrorizing other crypto exchanges.
If there are no changes, then the SEC policy is correct.

I think nothing has damaged the SEC's reputation as badly as this whole crypto-security-or-not situation.
Remember that Gensler is just a face for the SEC, but it's not like he's solely responsible for the lack of clear policies. There's something deeper going on there for sure.
I think they're just trying to assess the implications of deciding either way. But I won't be surprised if they throw Gensler under a bus eventually to try to regain credibility.

Meanwhile, a Coinbase finally lost their patience and decided to sue SEC in hopes to get the court to force SEC to give Coinbase a clear answer to their petition (after being ignored for months).
https://www.cnbc.com/2023/04/24/coinbase-sues-sec-after-months-of-silence-from-federal-regulator.html

He has taught classes about blockchain, digital currencies, and other financial technologies, and won the MIT Sloan Outstanding Teacher Award for the 2018-19 academic year. Gensler first joined the Institute in 2018.

One night a policeman found a man searching for his keys under a streetlight. He joined to help, only to realize after hours of searching, that the man had lost his keys in the park.

“Then why are you searching here?” asked the policeman.

“Because this is where the light is,” replied the man.

McHenry asked Gensler some very specific questions, including this one, regarding Ether (ETH), the native token of the Ethereum blockchain.

“Clearly an asset cannot be both a commodity and a security. Do you agree?”

“Ummm, I… I… it’s… actually all securities are commodities under the Commodity and Exchange Act, it’s that we’re excluded commodities, but I would agree that a security cannot also be an excluded commodity and an included commodity, I’m sorry chair, just to talk about the Commodity Exchange Act, more precisely.”

McHenry did not appear to think this answer was an answer at all.

He followed up: “I’m asking you, sitting in your chair now, to make an assessment under the laws that exist: Is ether a commodity, or a security?”

“Without speaking to any one…” began Gensler.

“You’ve repeatedly said you won’t speak to one,” interrupted McHenry, “But you’ve spoken to one: bitcoin. So I’m asking you to speak to a second one, with the second largest market cap.”

“In speaking to the tokens,” Gensler replied, “There’s ten to twelve thousand, if there’s a group of entrepreneurs…”

“I’m asking about one,” interjected McHenry. “I’m asking you a specific question, Chair Gensler. I said this in private, this should be no shock to you that I’m asking this question. Is ether a commodity, or a security?”

Gensler: “And again, it depends on the facts and the law on if there’s a group of individuals…”

McHenry: “I’m asking about the facts and the law, sitting in your seat, and the judgment you are making.”

Gensler: “And so, Mr. Chair, I think you would not want me to prejudge…”

McHenry wasn’t having it. “But you have prejudged on this. You’ve taken 50 enforcement actions. We’re finding out as we go, as you file suit, as people get Wells notices on what is a security in your view and your agency’s view. I’m asking you a very simple question about the second-largest digital asset. What is your view?”

Once again, Gensler refused to answer. “And my view is, if there’s a group of individuals in the middle of it, the public is entitled…”

McHenry gave up and moved on.