Ethereum has found itself under the regulator spotlight with a report suggesting that authorities are looking at whether it and other cryptocurrencies should be regulated as securities.
Will Ether Be Regulated the Same As Stocks?
In a report from the Wall Street Journal, people familiar with the matter have said that the U.S. Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) are attempting to determine whether the same rules designed for stocks should be applied to other digital currencies such as Ethereum.
According to the report, the commodities and securities watchdogs are questioning whether the creators of other cryptocurrencies, aside from bitcoin, ‘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,’ the people said.
Ethereum was created in 2014; however, some regulators believe that its token is in a ‘grey zone,’ and that it was probably created in an ‘illegal securities sale.’ According to the SEC, it has said in the past that it views cryptocurrencies as securities and that companies offering these tokens must register with the agency. Yet, the founders of Ethereum didn’t register the 2014 ether token sale, selling the coins to anyone who could buy them.
At the time of the sale, the Ethereum Foundation raised over 31,000 bitcoin, or around $18.3 million in July 2014, when it sold about 60 million ether. The money was used to build the Ethereum platform; however, because investors bought ether speculating that the launch would make the asset rise in value, the deal resembled that of a security, the WSJ said.
Notably, though, Silicon Valley venture capital firm Andreessen Horowitz has spoken out and said that no person or entity stands behind Ethereum’s token or is driving its value. The VC company was also one of a group of venture capitalists that lobbied against the SEC defining all cryptocurrencies as securities last month. Ether’s backers have said that the token serves a purpose beyond that of trading, adding that it’s paid to people who run the Ethereum program on their computer.
According to the report, ‘bug bounties,’ which are paid to programmers to fix vulnerabilities in ether’s code can boost the digital currency’s value, the people said. Regulators are also working at determining what other factors may be involved that could account for changes in ether’s value.
Regulators, including the CFTC and the SEC are due to meet on the 7 May to discuss the matter further.