According to a Bloomberg article published on June 26, Ether (ETH), the world’s second-largest cryptocurrency, is experiencing a downturn in its market performance due to regulatory uncertainty in the United States. The ambiguity stems from the question of whether the US Securities and Exchange Commission (SEC) will categorize Ether as an unregistered security, a designation that could complicate trading. In contrast, Bitcoin, the leading cryptocurrency, is recognized as a commodity in the US, providing it with a clear status.
Bloomberg reports that the SEC has recently labeled 19 cryptocurrencies as unregistered securities in lawsuits against major crypto exchanges Binance Holdings Ltd. and Coinbase Global Inc. These tokens have suffered a significant drop in value, with some falling by over 20% since the lawsuits were initiated on June 5. During the same period, Ether’s value has decreased by about 1%, while Bitcoin’s value has increased by approximately 12%. This discrepancy is likely due to investors moving away from assets with regulatory risks and towards Bitcoin, which is also benefiting from the potential introduction of Bitcoin exchange-traded funds.
David Lawant, head of research at digital-asset trading platform FalconX, expressed to Bloomberg his uncertainty about the SEC’s rationale for identifying certain tokens in their lawsuits. He also cautioned that Ether’s absence from the list doesn’t necessarily mean it’s safe from potential regulatory action.
The SEC has suggested that Ether, under its new proof of stake model, might be classified as a security. This has raised concerns as other tokens with similar origins, such as Solana, Cardano, and Polygon’s MATIC, have been singled out by the SEC. However, Preston Byrne, a partner at law firm Brown Rudnick, believes that due to Ethereum’s widespread use and the time elapsed since its initial sale, enforcement action against it is unlikely.
Riyad Carey, a research analyst at Kaiko, suggests to Bloomberg that the SEC’s naming of Ether staking services in their lawsuits could be causing some of the current caution around Ether. However, as Lawant points out, the SEC doesn’t need to name every crypto asset they consider a security to make their case, leaving Ether’s status still in question.
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