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A case of overreach (and an unexpected twist)

Posted on by darion

The saga of the U.S. Securities and Exchange Commission’s (SEC) pursuit of Ethereum continues to unfold, and recent events offer a glimmer of hope for the future of the world’s second-largest blockchain.

Let’s go back a bit. In April, Consensys, a leading Ethereum development company, shocked the cryptocurrency world by suing the SEC. This lawsuit arose from a Wells notice – an announcement of enforcement action – received by Consensys, indicating the SEC’s potential classification of Ether (ETH), Ethereum’s native token, as a security.

Consensys sues SEC over ‘illegal’ Ethereum authority following Wells notice

Earlier this month, Consensys received an SEC notice from Wells that it said was directed against its portfolio product, Metamask. The company is now suing the regulator for “wrongful seizure of power” over Ethereum

This move by the SEC was met with widespread criticism. Many saw this as regulatory overreach that could stifle innovation in the burgeoning DeFi (decentralized finance) space. Consensys argued that Ethereum is a decentralized network and ETH functions more like a commodity than a security.

Fast forward to June, and there was a surprising twist. On Wednesday, news broke that Consensys announced the closure of the SEC investigation into Ethereum 2.0 (an upcoming upgrade to the Ethereum network). While Consensys has clarified that the fight is not completely over, this development is a significant victory for the Ethereum community.

“The closure of the Ethereum investigation is momentous, but it is not a cure-all for the many blockchain developers, technology providers and industry participants who have suffered under the SEC’s unlawful and aggressive crypto enforcement regime,” Consensys wrote in a tweet.

The news provided a boost for all cryptocurrencies, with Ethereum rising from Tuesday’s low of around $3,380 to a high of $3,527 at the time of writing, according to CoinMarketCap data.

What does it mean?

The closure of the SEC investigation is a positive sign for Ethereum and the broader cryptocurrency space. This suggests that the SEC may reassess its position on the classification of decentralized blockchain networks and their native tokens. This could pave the way for a more collaborative approach between regulators and the cryptocurrency industry.

Recent developments have potential implications for the long-awaited approval of Ethereum spot ETFs in the US. These ETFs would directly track the price of ETH, allowing investors to gain exposure to Ethereum without having to hold the underlying asset themselves.

The SEC’s previous stance on Ethereum has created uncertainty about the ETF proposal. However, with the conclusion of the Ethereum 2.0 investigation, the path to approval for Ethereum Spot ETFs may become clearer. Regulatory clarity from the SEC is still needed, but this positive development increases the chances that these ETFs will start appearing in the US sooner rather than later.

While recent news is encouraging, the regulatory landscape for cryptocurrencies in the US remains unclear. The closure of the investigation focused specifically on Ethereum 2.0, leaving ETH’s status under the SEC’s radar.

Consensys, for example, stressed that it continues to expect greater transparency from the SEC on how the regulations apply to features such as MetaMask swaps and staking.

Bitwise improves archiving in ETFs

In another sign of optimism for the Ethereum ecosystem, Bitwise Asset Management recently changed its filing for its ETHW spot ETF. This revision notably includes a potential $100 million investment from cryptocurrency investment firm Pantera Capital. Bitwise’s initial seed capital investment was $2.5 million, which enabled the purchase of ETH prior to listing.

Other fixes for the Ethereum ETF S-1 spot are expected in the coming days. Two sources said Unit that Friday is the deadline for potential ETF issuers to respond to SEC comments on their Form S-1s. Sources described the comments as “light” and “sensible.”

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