Ethereum wins a phased victory in SEC investigation, US regulatory direction may change

Author: Mia, ChainCatcher

Following the approval of the Ethereum ETF, Ethereum has once again won a staged victory in the public eye.

On June 19, Ethereum infrastructure development company Consensys posted on social media: "We are pleased to announce a major victory for Ethereum developers, technology providers and industry participants: the U.S. Securities and Exchange Commission (SEC) Enforcement Division has notified us that it is ending its investigation into Ethereum 2.0. This means that the SEC will not file charges that the sale of ETH is a securities transaction."

The 14-month investigation has finally come to an end, winning a satisfactory progress.

The whole story of the SEC investigation

According to people familiar with the matter, the investigation began shortly after ETH switched to POS in September 2022.

When the ETH blockchain switched to "proof of stake", Ethereum got rid of the energy-intensive model used by Bitcoin and adopted a model that relies on a network of trusted validators, providing the SEC with a new excuse to try to define Ethereum as a security.

In response, a ConsenSys spokesperson said: "Look at Director Hinman's speech in 2018 and you will understand that when he said Ethereum was not a security, he did not use PoW or PoS as a basis, and the consensus mechanism was irrelevant."

As early as 2018, William Hinman, then director of the SEC's Financial Division, made an important speech, clearly stating that Ethereum was not considered a security. Current SEC Chairman Gary Gensler, before becoming SEC Chairman, also testified in Congress that ETH was not a security.

The sudden investigation undoubtedly sparked public controversy and put the SEC on the cusp.

Major crypto leaders began to publicly criticize the SEC.

Coinbase Chief Legal Officer paulgrewal.eth once posted on social media that millions of Americans hold ETH. Since its launch in 2015, ETH has been crucial to the cryptocurrency field. ETH is a commodity, not a security. This is also the position that the US Securities and Exchange Commission has taken for many years. The SEC has no sufficient reason to reject the ETH ETF application.

The premise of the approval of ETH ETF is the assumption that ETH is a commodity. With the approval of the application for ETH ETF in May this year, the commodity attribute of ETH has been proved again, which also means that the agency will end the investigation of Ethereum 2.0, which makes this investigation even more "nonsense".

The SEC seems to have realized this and finally gave up the investigation.

SEC moves towards moderation

Since Gary Gensler took office, the SEC seems to have been regarded as the "public enemy of the crypto world".

Whenever the SEC investigates or takes action against certain projects or celebrities, the market tends to fluctuate and even lead to a round of market declines.

Since he became the chairman of the SEC in April 2021, Gary Gensler has served more than half of his term. During his tenure, Gary Gensler led cases against many well-known crypto companies, including Binance, Coinbase, Kraken and FTX. These cases involve issues such as market manipulation, unregistered securities issuance, and violations of anti-money laundering regulations. These actions have made crypto companies feel unprecedented regulatory pressure, and have also triggered discussions in the industry about the scale and scope of regulation.

As time goes by, crypto users seem to have become immune, and the SEC's attitude towards crypto seems to have become moderated in the soft and hard work of the crypto industry.

Faced with controversy and doubts, Gary Gensler and the SEC are also working hard to adjust their regulatory strategies and statements. They began to pay more attention to communication and cooperation with the crypto industry, trying to find a regulatory method that can both protect investors' rights and interests and promote market development.

While "rectifying" the crypto industry, the SEC has been committed to the integration of crypto finance and traditional finance.

In January this year, the Bitcoin spot ETF was listed; in May, the SEC also approved the 19 b-4 filing of the Ethereum spot ETF. These two things promoted the integration of the crypto industry and mainstream finance.

Regarding the recent SEC's moderate measures in the crypto field, Hong Kong blockchain lawyer Wu Wenqian believes that "the SEC's regulatory attitude seems to have shown signs of a change in direction."

Lawyer Wu said, "Last month, the SEC officially approved the 19 b-4 document for the Ethereum spot ETF. Although there is still some controversy as to whether ETH is a security in law, this move has undoubtedly brought a glimmer of warmth to the cryptocurrency industry. Although the decision to withdraw the investigation may not have direct guiding significance for the transparency and consistency of supervision in law, it is undoubtedly regarded as an important signal that the direction of supervision may change.

Considering the upcoming US election this year, there may indeed be a major shift in policy direction. Against such a background, the SEC's adjustment in its regulatory attitude towards cryptocurrencies may herald a more open and inclusive regulatory environment in the future. For the cryptocurrency industry, this is undoubtedly a positive signal worth looking forward to."

On June 20, Forbes business reporter Eleanor Terrett revealed that Consensys founder Joseph Lubin said the company still plans to proceed with the lawsuit. "The U.S. Securities and Exchange Commission has decided to end its 14-month investigation into Ethereum. The month-long investigation is a welcome development - it is necessary, but not sufficient. There must be a better way to regulate the market than raids. We hope that the adversarial sentiment of some US regulators towards cryptocurrencies will begin to wane and that the national investor protection strategy will evolve from the current guerrilla tactics. Until then, we will continue our lawsuit against the SEC in Texas as we strive for more legal clarity for everyone. ”

In the face of the wild growth of the original crypto society, corresponding supervision and adjustment are undoubtedly the only way.

As Lubin said, only by clearly defining the scope and scale of supervision through legal means can we truly promote the healthy development of the crypto industry while protecting the legitimate rights and interests of investors, and regulators and the crypto industry should find better ways to regulate the market instead of surprise inspections.