02 March, 2024

PoS Cryptos Getting Increased Regulatory Scrutiny After The Merge

1 year ago

12 Dec, 2023

The Ethereum Merge has successfully taken place. It was a successful endeavor. The cryptocurrency known as Ethereum has transitioned to a Proof-of-Stake (PoS) consensus. Soon after the Merge on September 15th, SEC Chairman Gary Gensler has said that proof-of-stake cryptocurrencies might be considered securities, according to a recent report in Wall Street Journal.

Gensler reportedly told the Wall Street Journal that his agency may have jurisdiction over proof-of-stake (PoS) blockchains because of their similarities to investment contracts. PoS blockchains produce new currencies for innovators who combine their holdings. A quote from him in the Journal states that he denied referring to a specific coin.

In his words:

From the coin’s perspective…that’s another indicia that under the Howey test, the investing public is anticipating profits based on the efforts of others.

According to this criterion, an asset is deemed an investment contract if investors commit their money to funding an enterprise to profit from the enterprise’s efforts. Gensler said that cryptocurrencies based on proof-of-stake might be successful in passing that criteria.

The chairman of the Securities and Exchange Commission (SEC) said that if a cryptocurrency exchange were to provide stake services to its users, the transaction would, excluding a few minor labeling adjustments, seem to be quite similar to lending. Gensler has been quite clear about the fact that businesses that provide services related to cryptocurrency financing are required to register with the agency.

Ethereum‘s native ETH token used to be one of only two cryptocurrencies – the other being bitcoin – that were officially classified as commodities by federal authorities. That was back when Ethereum’s chain was based on proof-of-work.


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