The classification of Ethereum, the second-ranked crypto in the world, has caused more confusion in the US since regulators cannot agree on whether it is a security or a commodity.
At a recent congressional oversight session, Congressman Patrick McHenry pressed Securities and Exchange Commission chair Gary Gensler about whether Ether is security.
Gensler avoided giving a straight answer, which drew criticism from the crypto community.
McHenry also emphasized the murky legal landscape around the crypto business, noting that while the previous SEC director Bill Hinman had proclaimed Bitcoin and Ethereum to be non-securities, the current chair chose to institute several enforcement proceedings without clearly defining the asset class first.
The Commodity Futures Trading Commission, likewise responsible for overseeing the US derivatives markets, recently took steps that further demonstrated the lack of agreement in the sector of digital assets.
On 27 March, CFTC filed suit against Binance for engaging in “Willful Evasion” of laws by selling unregistered crypto derivative products.
The regulator’s definition of Ethereum as a commodity in the filing contrasted with the SEC’s classification of them as securities, demonstrating the regulators’ ambiguity about the classification of digital assets.
As reported by TronWeekly, Gary Gensler, the chairman of the SEC previously warned that Ethereum’s upgrade could mean the cryptocurrency could be regulated as a security that sparked a price sell-off then.
Gensler’s comments were made during Ethereum’s Merge upgrade where it officially transitioned to a proof-of-stake system, last year.
This arrangement where Ethereum’s proof-of-stake, allowed holders to lock up their coins to earn a return, is what caught SEC’s attention to regulating Ethereum as a security.
Ethereum Staking Business Face Uncertain Future In The U.S
Many in the crypto community feel that SEC’s crackdown on the passive investment offering has allegedly forced American crypto businesses to go offshore.
Not all crypto players, however, submitted; firms like Ripple continue to fight back against the agency’s claim that the XRP token is an unregistered security.
In the latest update, the blockchain payment firm offered a strong rebuttal to SEC’s supplementary letter seeking to squash Ripple’s Fair Notice Defense.
For perspective, Ripple’s fair notice defense argues that it was unable to foresee the SEC’s enforcement action against it because there are no regulations governing the crypto market.