JAKARTA - Ethereum (ETH), the second-largest cryptocurrency by market cap, has been the subject of debate between two US regulatory agencies: the Commodity and Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).
On the other hand, the SEC considers Ethereum as a security that must comply with strict regulations, CFTC claims that Ethereum is a free-tradable commodity on the market.
CFTC chairman Rostin Behnam in his recent testimony to lawmakers, said he believed Ether was a commodity because it was listed on the CFTC and its derivative market. He also confirmed that the CFTC has jurisdiction over the derivative market and its underlying market for Ether and Bitcoin, which are also considered a commodity.
Behnam's statement came after the CFTC filed a lawsuit against Binance, the world's largest crypto exchange, on charges of illegal trading in crypto commodities. According to the CFTC, Binance offers derivative products such as futures, options, and swap contracts without having a corresponding license from the CFTC. In addition, the CFTC also accused Binance of facilitating margin and leverage trading for US customers without complying with anti-money laundering rules.
The CFTC lawsuit against Binance highlights the legal uncertainty surrounding the crypto industry in the US. Although some cryptocurrencies such as Bitcoin, Ether, Litecoin, and other stablecoins have been recognized as commodities by CFTC, there are still many other cryptocurrencies whose status is unclear. In particular, cryptocurrencies that use Proof-of-Stake (PoS) mechanisms to achieve network consensus can be considered securities by the SEC.
SEC chairman Gary Gensler recently stated that he believes that most PoS cryptocurrencies are securities as they involve investment contracts between publishers and holders. He also called for cooperation between the SEC and CFTC to create a comprehensive regulatory framework for the crypto industry.
Meanwhile, the crypto industry has urged the US government to provide legal clarity and certainty for business actors and investors. Some prominent figures such as Brian Armstrong, CEO of Coinbase, and Mark Cuban, billionaire and owner of Dallas Mavericks, have criticized the SEC's strong stance on the crypto industry. They argue that the SEC is hampering innovation and growth in this sector by creating fear, uncertainty, and doubt.
Amid these debates, Ethereum remains one of the most popular and influential crypto projects in the world. Ethereum is in the process of switching from the Proof-of-Work (PoW) mechanism to PoS through an upgrade to a network called Ethereum 2.0. The goal of this upgrade is to increase the scalability, security, and energy efficiency of the Ethereum network. However, this transition can also affect Ethereum's legal status in the eyes of the SEC.
According to Coinspeaker, over the past few years, some in crypto people view CFTC as a more friendly agent for the sector. However, the CFTC and its chairperson Rostin Behnam have recently taken several law enforcement measures and actions against crypto companies.
The latest is targeting the largest crypto platform by trading volume, Binance, which could have broader implications in the long term. On Tuesday, March 28, lawmakers asked Behnam if he still expected any room for crypto innovation in the US.
"This should really be a concern. Europe has implemented a fairly comprehensive rule that will be implemented over the next few years," Behnam said, adding that the US needed to "move the ball forward."
Will Ethereum remain a commodity or a securities? How will it impact the crypto industry as a whole? These are some important questions that US regulators need to answer as soon as possible.
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