Will Ethereum Be Classified as Security? Crypto Analyst Offers Perspective on Raging Controversy

The cryptocurrency space has been in a debate concerning the approval of Ethereum as a security by the US Securities and Exchange Commission (SEC). This discussion has been ongoing for a considerable period, with various analysts and industry experts offering diverse perspectives on the matter’s outcome.

New York Attorney General Fuels the Debate

Recently, a crypto analyst and legal adviser Metalaw weighed in on the matter, making reference to the action taken by New York Attorney General (NYAG) Letitia James approximately a year ago. In this past move, Attorney General James made headlines by publicly asserting that Ethereum, one of the leading cryptocurrencies in the market, is a security.

Will @GaryGensler declare $ETH a security?

Maybe.

Don’t forget, NYAG Letitia James already did this a year ago and issued a press release trumpeting the move.

“This action is one of the first times a regulator is claiming in court that ETH, one of the largest cryptocurrencies…

— MetaLawMan (@MetaLawMan) April 23, 2024

This assertion was made during a legal battle against the cryptocurrency exchange KuCoin, where Ethereum was likened to LUNA and UST. James’ argument hinges on the notion that ETH  is a speculative asset that relies on the efforts of third-party developers to generate profits for its holders, thereby necessitating registration as a security before being sold.

The debate on whether Ethereum should be classified as a security or not holds significant implications for the potential approval of an Ethereum ETF, as securities are subject to stringent regulatory oversight and registration requirements. This stance has garnered attention, as SEC Chairman Gary Gensler has refused to deny the possibility of Ethereum being classified as a security, stating that it depends on the facts and the laws of the United States.

Diverging Views from Industry Experts

While the approval of Ethereum as a security could lead to an ETH ETF approval, it has generated excitement among traders and investors who anticipate a potential price surge akin to the one witnessed after the approval of the Bitcoin ETF. However, issuers of the ETH ETF have expressed skepticism about a positive outcome.

VanEck CEO Jan van Eck has indicated that the approval is likely to be rejected, drawing parallels with the lengthy process involved in the approval of Bitcoin ETFs. He stated that regulators typically provide comments on applications, and this process took weeks before the Bitcoin ETFs were approved, but currently, no such signs are evident for Ethereum.

Furthermore, Eric Balchunas, a senior ETF analyst at Bloomberg, has estimated the odds of spot ether ETFs being approved in May at a mere 35%. While acknowledging that there are reasons for approval, he noted that the signs and sources that previously indicated optimism for the Bitcoin spot ETF approval are lacking in Ethereum’s case.

As the debate on whether Ethereum is a security or not gets intense, the cryptocurrency community stays hopeful, eagerly awaiting a decision that could push the price of Ethereum even higher. Traders and investors see the approval as a powerful catalyst that might spark a bullish rally. This is supported by observations of large wallet holders purchasing more ETH, indicating strong confidence in its future.

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