SEC to Focus More on Crypto-oriented Unregistered Securities Lawsuits
SEC Chief Gary Gensler shared his stance on the cryptocurrency market long ago by claiming that he was prepping the agency to bring more lawsuits. Some reports have noted that he increased the SEC staff last year to bring more unregistered securities lawsuits on the cryptocurrency market.
However, he has once again started to hire more lawyers at the regulatory agency for the same reason. SEC also received a considerable amount of pushback on account of its close association with the FTX exchange before its catastrophic demise.
However, despite the rebuke, the SEC Chief has decided to retain his beliefs that every blockchain project with a proof of stake mechanism is an unregistered security. Some former employees of SEC have exonerated Ethereum from the charge of being a security.
However, the latest stance of Gensler might put Ethereum with other altcoin projects that are under the threat of a lawsuit from the SEC and violation of the Securities Act.
The legal burned on SEC is increasing to provide the sufficient and proper legal precedent for classifying various cryptocurrencies as unregistered securities. Regardless of the increasing unrest and antagonism, SEC Chief claimed in the latest SEC meeting that any blockchain project that depends on a proof-of-stake consensus mechanism should be classified as an unregistered security.
He claimed that the stakeholders on these platforms are also expecting 2, 4, and 18 percent returns on their staked cryptocurrencies.
It is worth noting that Ethereum has transferred to the PoS staking model recently. The PoS model is used to verify and add new transactions on a blockchain network by asking the validators to stake already mined cryptocurrencies.
This mechanism was introduced to decrease the energy input required to mine and approve new blocks. Rather than competing with each other, the validators in the PoS mechanism system ensure depend on the amount of staked cryptocurrencies to authenticate new transactions.
PoS Blockchains and Unregistered Securities
Gensler has claimed that all PoS-based blockchains are made up of developers who are operating as businessmen. The values of the cryptocurrencies they issue depend on the performance of these enterprises to make profits much like stocks.
Therefore, he has classified them as unregistered securities. SEC has successfully barred cryptocurrency exchange Kraken from offering staking services to their clients inside US jurisdiction.
The firm also had to pay a hefty fine of $30 million on counts of prejudgment interest, civil penalties, and disgorgement. If regulators can prove that staking cryptocurrencies are securities, Ethereum can face big issues on account of an array of decentralized applications hosted on the network. Meanwhile, regulators, including SEC Chief have claimed that Bitcoin is a commodity despite being a cryptocurrency.
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