Ethereum: Is It a Security? Gary Gensler, the Chair of the SEC, Defers the Question
SEC head Gary Gensler responded to a query about whether the agency considered Ethereum to be a security by saying he would “defer on that question.”
Even while the SEC reviews many applications for Ethereum ETFs on the spot, Gary Gensler, the head of the U.S. Securities and Exchange Commission (SEC), declined to comment on whether the agency views Ethereum as a security.
In response to a query about whether the regulator considered Ethereum to be a security, Gensler said he would “defer on that question” while speaking on Bloomberg TV.
“On any one of these crypto tokens, it’s about the facts and circumstances as to whether the investing public is anticipating a profit based on the efforts of others,” he said. “Documents are in front of us. I will refrain from commenting.
Given that the SEC is reviewing many requests for a U.S. spot Ethereum ETF, its stance on the cryptocurrency has taken on significant importance. Just this week, the regulator postponed again its judgment on whether to accept spot Ethereum ETF proposals from Fidelity, Invesco, and Galaxy Digital, as well as the investing behemoth BlackRock’s iShares Ethereum Trust.
The SEC is expected to keep postponing its judgment on Ethereum ETF applications until May 23, which is the last day for applications from VanEck and Cathie Wood’s investment company Ark Invest, according to Bloomberg ETF expert James Seyffart.
If so, it is consistent with the regulator’s practice of approving spot Bitcoin ETFs slowly.
Several spot Bitcoin ETFs were authorized by the regulator in January, but only grudgingly. Gensler justified this decision by saying that “circumstances, however, have changed,” after a court order for the SEC to consider Grayscale’s application to convert its GBTC product into an ETF.
The authorization of spot Bitcoin ETFs, Gensler said at the time, “should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities.” He also said that “investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto.”
In the interview on Wednesday, he restated this viewpoint and referred to cryptocurrency as a “highly speculative asset class.”
“Are there cash flows, or what’s the use case for thousands of these tokens?” Gensler enquired. He said, “They also may be securities, because the investing public is relying on the efforts of some group of entrepreneurs in the middle of these products.”
Ethereum, the SEC, and Gensler
The SEC has long maintained, under Gensler, that Bitcoin is a commodity rather than a security and has declined to comment on Ethereum’s situation.
In stark contrast to his remarks before joining the agency, Gensler has declined to commit to the SEC’s stance on Ethereum’s classification as a security or commodity.
When Gensler was still teaching at MIT in 2018, he said that Ethereum is “not a security” in the SEC’s view. “Regardless of what it might have been” at the time of its 2014 initial coin offering, he said, “it’s now sufficiently decentralized that we’ll consider it not a security.”
Gensler then seemed to be quoting William Hinman, the former Director of Corporate Finance at the SEC, from his well quoted June of that year “sufficiently decentralized” address.
