Defining the Ethereum Foundation’s cryptocurrency, Ether, as a security in the US could have serious, detrimental effect on markets around the world.
The US Commodities and Futures Trading Commission (CTFC) head has urged fellow regulators at the Securities and Exchanges Commission (SEC) to decide quickly whether the world’s second biggest cryptocurrency comes under its rules or not.
The Wall Street Journal is reporting that Brian Quintenz, CTFC commissioner, has said the agency should quickly provide clarity about whether it plans to label Ether – the currency created by the Ethereum Foundation, and the fuel for many smart contract driven ICOs – is a security or not. Ether is currently the world’s second largest cryptocurrency by market capitalisation, being collectively worth something in the region of $72.52bn according to Cryptocompare, so it’s a decision that would have big ramifications for those holding, trading, and building business proposals around it.
The CTFC – though not the commissioner himself – is currently discussing Ether’s status with the SEC. Quintenz, however, has gone on record as saying he believes that now, like Bitcoin, Ether should be classed as a commodity – though that view is not shared by one of his predecessors, who recently questioned whether Ether and Ripple have skirted regulation. Doubt has been cast over that status, though, because of the way the Ethereum Foundation distributed and controlled the cryptocurrency in its early days, by selling its ICO – back in 2014 – to anyone who would buy. It has since has gone on record as saying that it believes it has now become sufficiently decentralised as to not come under the SEC’s purview – largely defined by a well known set of parameters known as ‘The Howey Test’.
The Ethereum Foundation head, Aya Miyaguchi, recently told the NYT that it “neither controls the supply of nor has the ability to issue Ether, and the quantity of Ether that the foundation holds (under 1 percent of all Ether) is already lower than that held by many other ecosystem participants.”
The SEC has been sending our warning flares to cryptocurrencies, especially altcoins associated with ICOs, for quite some time now warning that they consider many of them to be analogous to securities, and begun to shut down some operations that it feel blatantly fail to avoid that definition – as they must be registered with it under US law.
Quintenz, though, thinks Ether has done enough. Quoted by the WSJ, he recently told a cryptocurrency conference in New York that “You have to regulate what exists in the market, and if things change, you need to recognize that things have changed.”
“But,” he contined, “if someone has issued, through an [initial coin offering], a security, then that was an unregistered security sale and the SEC deserves to be able to have jurisdiction over that and if necessary, prosecute.”
He also told the same conference that any decision on Ether’s status was still as while away.