Ethereum
Ethereum co-founder says SEC is ‘enlightening’ everyone on crypto
Joe Lubin is in conflict with the Securities and Exchange Commission. Not only is the financial regulator waging a war against Ethereum, he claims, but it is also seizing jurisdiction over the future of the Internet. Lubin therefore decided to fight back.
In 2015, Lubin was part of the team that created Ethereum, the computer network that hosts the world’s second-largest cryptocurrency, known as ETH. Later that year, Lubin founded Consensys, with the vague ambition of supporting the development and adoption of Ethereum and building software products on top of the network. In April, Consensys received an unwelcome missive from the SEC, known as the Wells Notice, informing it that it was about to be sued. According to Consensys, the regulator’s grievance concerned one of the software products in its stable: MetaMaska crypto wallet that allows users to store crypto coins and interact with Ethereum-based applications.
Consensys says the SEC notice, which has not been made public, states that MetaMask made the company an unregistered securities broker-dealer. Specifically, the SEC is challenging two features of MetaMask: one that allows users to swap between different tokens and another that allows them to lock their tokens in exchange for a regular reward, in a process called staking.
On April 25, Consensys filed a trial of its own against the SEC. The complaint accuses the regulator of an “unlawful assumption of authority over ETH,” which “has none of the attributes of a security” – the specific type of financial instrument over which the SEC exercises dominance. If the SEC had its way, “it would be a disaster for the Ethereum network,” the complaint claims.
In its Wells opinion, the SEC did not characterize ETH itself as a security, Consensys explains, instead focusing on MetaMask’s features. But according to Consensys, the agency has long been conducting a discreet investigation into Ethereum, believing that ETH should be reclassified as such.
It’s not fair, Consensys says, because an SEC director previously described ETH as a commoditynot a security, and the Commodity Futures Trading Commission, a separate US financial regulator, has made the same statement. “Consensys built its business within the context of this regulatory consensus,” the lawsuit states.
By filing this lawsuit, Consensys hopes to remove itself and Ethereum from beneath the SEC, clarifying the limits of its jurisdiction, and encouraging the rest of the crypto industry to fight back against what it described as “an excessive and illegal infringement of the SEC.” An SEC spokesperson declined to comment on the specific allegations made by Consensys, saying only that “failure to comply with securities laws deprives investors of critical protections, including rules that prevent fraud and manipulation.” , appropriate disclosures, segregation of client assets, safeguards against conflicts of interest.” , oversight by a self-regulatory organization, and routine inspection by the SEC. It is the investors who suffer and the American financial markets which risk suffering.”
The following questions and answers have been edited for brevity and clarity.