Ethereum Foundation in SEC’s Crosshairs: SEC’s Startling Action Triggers Apprehension and Ambiguity

The Securities and Exchange Commission (SEC) is ramping up its scrutiny of Ethereum, the second-largest cryptocurrency, by launching a legal campaign to categorize ETH as a ‘security.’ This regulatory investigation poses a significant challenge to the crypto ecosystem, especially as companies are vying for regulatory approval of spot Ethereum ETFs.

The reason behind this probe stems from reports that the SEC has issued subpoenas to several US companies involved in ETH transactions as part of an investigation to classify Ethereum as a security. If this legal action proceeds, it could have profound consequences for Ethereum itself, the potential approval of ETH ETFs, and the wider crypto market.

The Ethereum Foundation has acknowledged receiving inquiries from state authorities and has taken steps to remove certain disclosures, including the warrant canary, from its website’s GitHub repository, indicating the sensitivity of the investigation. Although the exact scope and purpose of the investigation remain undisclosed, it is linked to Ethereum’s transition to a proof-of-stake network in 2022.

Analysts have revealed that a Swiss regulator has also requested information from the Ethereum Foundation, suggesting coordination between the Foundation and the SEC. The market has reacted strongly to this news, with Ethereum’s native token, ETH, experiencing a significant price decline of up to 6% due to concerns about the regulatory uncertainty surrounding ETH ETFs. The SEC’s reluctance to engage with potential ETF issuers has cast doubt on the likelihood of ETH ETF approval by the May deadline.

Scott Johnson, a general partner at Van Buran Capital, commented on the SEC’s actions, pointing out that “the SEC has been in an untenable position for some time with its stance on ETH.” The SEC’s intensified investigation into Ethereum could have far-reaching implications for the broader crypto market.