Ethereum Breathes Easy as SEC Halts Investigation, Consensys Confirms

In a surprising turn of events for the crypto space – an industry that is constantly grappling with regulatory questions, one might add – the United States Securities and Exchange Commission (SEC) has decided to drop its investigation into Ethereum, the second largest cryptocurrency in the world. by market capitalization – as reported by ConsenSys, central figure in the Ethereum ecosystem. This news is a breath of fresh air for the Ethereum community, which has been under the government agency’s regulatory microscope for some time.

The regulatory overhang lifted

The SEC’s Enforcement Division has officially notified Consensys, a leading developer of Ethereum, that it is closing its investigation into Ethereum 2.0. This means that the SEC will not bring charges alleging that sales of Ether (ETH) are securities transactions. The move is being hailed as a “major victory for Ethereum developers, technology providers and industry players.”

The SEC’s decision could influence the regulatory treatment of other cryptocurrencies and blockchain projects. Recognition of Ethereum’s decentralized structure could lead to a more nuanced regulatory approach to the valuation of digital assets, potentially encouraging innovation and growth without fear of harsh regulatory action.

The backstory

The decision came after Consensys sent a letter to the SEC on June 7, asking if it would end its investigation into Ether. This was in response to the regulator approval of ETH spot exchange-traded funds (ETFs) in May, which Consensys said was “based on the fact that ETH is a commodity.”

You will recall that the SEC investigation into Ethereum focused on whether cryptocurrency must be classified as a security, which would impose strict regulatory requirements. The investigation was related to the initial coin offering (ICO) that funded the development of Ethereum in 2014. ICOs, commonly used by blockchain projects to raise funds, were compared to securities offerings , requiring SEC compliance.

Laura Brookover, senior counsel at Consensys, sharing the SEC’s response letter stating that the agency does not “intend to recommend enforcement action.” However, the SEC has not yet responded to requests for comment.

This development follows a series of subpoenas issued by the SEC in March to several companies related to attempts to classify ETH as a security security. In response, Consensys filed a complaint against the SEC in April, shortly after receiving a Wells notice from the agency warning that its MetaMask crypto wallet may have violated securities laws.

The lawsuit claimed that the SEC and its chairman, Gary Gensler, believed that ETH was a security since at least early 2023. Consensys also claimed that Gurbir Grewal, head of the SEC’s enforcement division, had approved a formal order to investigate the status of Ether as a security. security on March 28, 2023.

Although the SEC has dropped its investigation into Ethereum, the lawsuit is still ongoing. However, for now, the Ethereum community can breathe a sigh of relief as the cloud of regulatory uncertainty begins to lift.

Market reaction

Following this news, the price of Ether (ETH) jumped around 1.4% to $3,541, surpassing the critical and closely watched $3,500 level. This serves as a litmus test for the impact of regulatory decisions on the volatile crypto market.

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