Senior Reporter,
Computerworld |
May 8, 2018 3:13 AM
PT The second most valuable cryptocurrency behind bitcoin, Ethereum, is under regulatory scrutiny by the Securities and Exchange Commission (SEC), which is considering whether it should be classified as a commodity or a security. An SEC decision to classify Ethereum’s Ether cryptocurrency as a security could have far-reaching consequences for other digital monies originally crowdfunded through initial coin offerings (ICOs).

Bitcoin, Ether and other cryptocurrencies have come under increased regulatory scrutiny by states and the U.S. government seeking to protect investors purchasing the digital currencies on open exchanges. Internationally, bitcoin has also been more tightly regulated for its drain on infrastructure resources, mainly its use of electricity to run vast data centers.

The SEC, however, is exploring whether it has the ultimate purview over Ether or whether the cryptocurrency would fall under the authority of another agency as a commodity, according to a report in the Wall Street Journal. “I think the flexibility is there to come out in either direction,” said Zach Fallon, a former senior council with the SEC who is now a securities law attorney and consultant as well as senior legal advisor for Dispatch Labs, a start-up developing an enterprise-class blockchain protocol for dApps.

Before leaving the SEC in April, Fallon worked with the SEC’s director of corporate finance and spent his last year with the agency focused on distributed ledger technology (blockchain) and small business regulatory policies. The Ethereum Foundation’s blockchain network was bootstrapped through an Ether presale in August 2014.

And, therein lies the rub, separating Ether from cryptocurrencies such as bitcoin, which has been determined to be a commodity because there was no pre-launch ICO, according to Fallon. By pre-selling Ether, Ethereum could be viewed by the SEC as a common enterprise that had influence over its value, similar to how a public company’s actions are key to its stock’s value. Read more from…

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