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The price of Ethereum took a hit overnight as news broke that the U.S. Securities and Exchange Commission (SEC) has been secretly considering the cryptocurrency as a security for over a year. Ethereum is currently trading at a weekly low of around $3,050, down 3.9% on the day, with traders moving roughly $15 billion worth of volume in the past day. This marks a 15% decrease from its value a month ago.
The revelation came to light following the publication of redacted portions of a lawsuit filed by Consensys against the SEC, which referenced an internal Formal Order issued by the regulator in March 2023 that specifically mentioned the investigation of “certain securities, including, but not limited to ETH.” This internal order contradicts SEC Chair Gary Gensler’s public stance on Ethereum, as he has previously avoided explicitly stating whether the cryptocurrency is considered a security.
Gensler’s prior statements on Ethereum, dating back to his time at MIT in 2018, indicated that he believed Ethereum was not a security in the eyes of the SEC. However, with Ethereum’s transition to a proof-of-stake model in 2022, Gensler has since suggested that proof-of-stake cryptocurrencies could be considered securities. The SEC’s internal order also references an investigation into “Ethereum 2.0,” the network post-Merge.
The SEC’s position on Ethereum is significant as it evaluates multiple applications for spot Ethereum ETFs from asset managers like Grayscale, BlackRock, and Franklin Templeton. With a key deadline approaching in late May, there is uncertainty surrounding the approval of these ETFs, with investment bank JP Morgan giving even odds on approval or rejection.
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