According to WSJ: US Regulators Probing Whether Ethereum is a Security

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Wall Street Journal report: Ethereum under Federal Scrutiny

Ethereum, the second biggest cryptocurrency by market capitalization, is being reviewed by the federal regulators to determine whether it meets the criteria of a security.

As per Wall Street Journal (WSJ), regulators at the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) are investigating whether various popular digital currencies not only initial coin offering (ICO) should be regulated under federal law.

Ethereum a.k.a. Ether is a specific focus of the inquiry. The native assets of the Ethereum blockchain units of which were initially sold through a presale in 2014, however new currency have been issued through mining after the launch of the network in 2015.

Ethereum currently is the second most valuable digital currency, with a circulating market capitalization of around $65 billion.

The report states:

“Ethereum’s creators exert significant influence over their value, in the same way, a company’s stock price depends on its managers and their strategy, performance, and investments.”

A year ago, for example, the Ethereum price briefly dropped in response to the false rumour that Ethereum creator Vitalik Buterin had died in a car crash. However, some analyst thinks the project has matured to the point where a similar occurrence would not cause a marked effect on ETH’s value.

Regulators may likewise consider what level of demand for ether comes from people who utilize it to run decentralized applications (DApps) on the network, against the speculators who purchased it simply for its investment potential.

According to one person familiar with the investigation said, “Applying those factors, it’s still sort of gray.”

As per a report, a working group constitutes of venture capital firms and industry lawyers recently met Securities and Exchange Commission (SEC) officials in a bid to convince the agency to provide formal guidance that ether and certain Initial Coin Offering (ICO) tokens are not securities. However, some people familiar with the meetings told that the agency was not overly open to the proposal.

Recently, former Commodity Futures Trading Commission (CFTC) Director Gary Gensler stated that he would classify Ethereum and Ripple (XRP) as “noncompliant securities,” however, he admitted that regulators might determine that Ethereum has become so decentralized since its network started that it no longer meets this classification.

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