What a whirlwind crypto has been lately. On June 5, the Securities and Exchange Commission (SEC) announced a lawsuit against Binance, the world's largest crypto exchange company. SEC Chairman Gary Gensler must have had two cups of coffee that morning because he followed up the Binance allegations with a fresh lawsuit against Coinbase, the largest crypto company in U.S., the very next day.
Since the collapse of crypto exchange FTX and a number of other crypto companies in 2022, regulators in the U.S. have taken a scorched-earth approach to rein in companies potentially in violation of offering cryptocurrencies that meet the criteria of securities.
This dilemma of whether cryptocurrencies are a security, commodity, or something else entirely is one of the unanswered questions facing the industry. And it's one that has long plagued one cryptocurrency in particular -- Ethereum (CRYPTO: ETH).
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The current landscape
The qualification of cryptocurrencies as securities likely means more stringent regulation and oversight from the SEC -- which could potentially impede their development, the evolution of use cases, and subsequent price appreciation.
In contrast, cryptocurrencies that are qualified as commodities would be regulated by the Commodity Futures Trading Commission (CFTC), likely with a more laissez-faire approach.
In a rare occurrence of agreement in crypto, both the SEC's Genlser and CFTC Chairman Rostin Behnam have said one of the few cryptocurrencies to clearly meet the criteria of a commodity is Bitcoin, the most valuable crypto in the world.
However, opinions differed when it came to Ethereum. Gensler's stance on the matter remains ambiguous, and he often evades a direct opinion when questioned, while his counterpart Behnam has asserted that Ethereum is a commodity.
Unofficially official
While the recent lawsuits against Binance and Coinbase contained dozens of allegations, there seems to be some unintentional clarity and a silver lining for Ethereum.
One of the primary accusations is that these companies are offering unregistered securities. In the legal filings, the SEC clearly defined 19 cryptocurrencies that it believed met the criteria of a security -- but Ethereum wasn't mentioned.
Considering the SEC's concerted efforts in pursuing legal actions, it is only natural to question why Ethereum, the second most valuable cryptocurrency worldwide, was not explicitly targeted. Omission of Ethereum from such legal proceedings could be interpreted as a testament to its status as a more legitimate digital asset.
Perhaps it's slightly preemptive without definitive clarification, but it's difficult not to view this as a promising sign for Ethereum in the long term. If the SEC believed Ethereum was within its jurisdiction, surely it would have made that clear. But it didn't.
The absence of Ethereum in the SEC's legal actions suggests Ethereum has managed to position itself as more than just a financial instrument, thereby giving it unofficial status as a commodity.
By not labeling Ethereum as a security, the SEC potentially recognizes its distinct characteristics as a bona fide decentralized network without centralized management or control. This acknowledgment could be vital for Ethereum's future price, as it allows for continued innovation and development of new use cases, key factors that drive cryptocurrencies' value.
Recognition of Ethereum as a commodity not only mitigates risk. It also sets the stage for Ethereum to further solidify itself as the foundation of a burgeoning decentralized ecosystem, home to innovative applications that have the power to disrupt multiple industries.
