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SEC Ends Ethereum 2.0 Probe with Non-Exoneration Clause

Enforcement | Jun 19, 2024

SEC letter in the matter of Ethereum 2.0 - SEC Ends Ethereum 2.0 Probe with Non-Exoneration Clause

Image: SEC letter to Consensys, In the matter of Ethereum 2.0

SEC Ends Investigation into Consensys and Ethereum.  Implications for the Crypto Industry

On Jun 18, 2024, Consensys announced that the United States Securities and Exchange Commission (SEC) has dropped its investigation into Ethereum 2.0 and will not take legal action over Ethereum. This is big win for the Ethereum community and will have implications for the future of cryptocurrency regulation in the United States.

Background

In 2018, the SEC when Jay Clayton was Chair and in public speeches SEC Director Bill Hinman expressed that Ether was not a security.  However, when Gary Gensler, the current SEC Chair, took over, the regulatory attitude became clear as mud.  In 2023, the SEC began looking into Ethereum 2.0, implying that it could be a security. Consensys received many subpoenas and a formal order of investigation on March 28, 2023. Consensys replied by launching a lawsuit in April 2024, arguing that Ethereum is a commodity and outside the SEC's authority.​

SEC's Decision

On June 18, 2024, the SEC issued a letter to Consensys stating that it would not take enforcement action against Consensys or Ethereum 2.0.

  • The letter officially closes the SEC's inquiry of Consensys and Ethereum 2.0, noting that based on the facts now available, the SEC will not propose enforcement action against Consensys Software Inc.

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  • The letter says that the conclusion of the study should not be interpreted as an exoneration of Consensys or its conduct. It implies that, while no action is advised at this time, future measures may be taken if additional evidence becomes available.

Implications

  • The SEC's ruling confirms that Ethereum is a commodity, not a security, might set a precedent for other cryptocurrencies. This judgment coincides with previous SEC recommendations under former Chairman Jay Clayton, who stated that Ethereum was sufficiently decentralized and not regarded a security.
  • The SEC's actions have been views as inconsistent, causing confusion and uncertainty in the market. The closure of this investigation boosts developer and investor confidence in the Ethereum ecosystem, will promote more innovation and investment. The price of Ether reacted favourably after the announcement.

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  • The non-exoneration clause highlights the SEC's continued caution and the provisional nature of their judgment, emphasizing the significance of Consensys and other crypto firms conforming to regulatory norms.

Conclusion

Moving ahead, regulators must work with industry stakeholders to create open and equitable policies that promote innovation while protecting investors. Addressing legal and regulatory ambiguity is crucial for creating a more stable and healthy crypto sector.


NCFA Jan 2018 resize - SEC Ends Ethereum 2.0 Probe with Non-Exoneration ClauseThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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