The Chair of the Securities and Exchange Commission (SEC), Gary Gensler, recently revealed that the lack of clear crypto regulations in the United States is causing most digital assets, excluding Bitcoin, to be considered unregistered securities. Kraken cryptocurrency exchange’s staking program has already been classified as such, which means proof-of-stake (PoS) secured blockchains like Ethereum, Cardano, and Solana may face difficulties ahead.

In a recent interview with New York Magazine, Gensler (whom we will be referring to as Golden Gary) mentioned that, with the exception of Bitcoin, all cryptocurrencies in circulation are usually established by a group of entrepreneurs who tend to base their headquarters in offshore tax havens and may also have a foundation. Golden Gary also asserts that the teams behind these cryptocurrencies employ complicated and opaque methods to market their tokens and attract investors.

“They might drop their tokens overseas at first and contend or pretend that it’s going to take six months before they come back to the U.S.,” Securities Gary posited. “But at the core, these tokens are securities because there’s a group in the middle and the public is anticipating profits based on that group.”

Back in July 2015, prior to Ethereum’s launch, the network conducted an initial coin offering (ICO) where it sold its native ether token for Bitcoin. The public ICO sale sold over 49 million ETH, which earned the Ethereum Foundation, a non-profit organization responsible for managing the blockchain’s growth, more than $17 million.

During ETH’s early days, many participants in the crypto market believed that the token met the SEC’s Howey Test, as it involved investing money in a common enterprise with the expectation of profits based on the enterprise’s efforts.

Although Ethereum’s status as a security remained uncertain in its early years, the SEC had previously commented on the network’s status. William Hinman, the former director of the SEC’s Division of Corporation Finance, stated in June 2018 that he believed Ethereum had become sufficiently decentralized, like Bitcoin, and was, therefore, not a security.

However, under the leadership of Gary, the SEC today may take a stricter stance. The former investment banker has suggested that Ethereum, following the Merge upgrade, could be regarded as a security by regulators.

It is worth noting that the SEC has already targeted Ripple in a lawsuit that alleges the blockchain payments company sold the XRP token as an unregistered security. The outcome of the case, which is still ongoing, is likely to have significant implications for the crypto industry, regardless of the decision.

In additon to securities law and crackdown becoming increasingly apparent, there has also been significant effort to regulate Stablecoins. This article I wrote about stablecoins and staking regulation puts a lot of things in perspective.

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