Ethereum vs SEC: Claims Network, not Foundation, Could Face Scrutiny

Key Takeaways

• The Ethereum Foundation is reportedly under scrutiny by the US Securities and Exchange Commission (SEC).
• Legal experts suggest the investigation may focus more on the Ethereum network rather than the foundation itself.
• The SEC’s alleged action has sparked speculation within the crypto community as the Ripple lawsuit stretches on. 

News reports that the Ethereum Foundation is under the microscope of the United States Securities and Exchange Commission (SEC) made recent headlines. However, the move could be part of a broader examination of the Ethereum network itself. Amid the scrutiny, the crypto community is abuzz with speculation.

Where is the SEC’s Interest?

Media reports alleged that the SEC has requested information from companies associated with the Ethereum Foundation. However, it’s important to clarify that the Ethereum Foundation, the developer organization behind Ethereum, might not be the primary target of this probe. Instead, the focus could be more on the network itself and its operations.

Crypto lawyer Preston Byrne emphasizes  that receiving requests for information does not necessarily imply that the Ethereum Foundation is the direct subject of the investigation. According to Byrne, there could be various reasons why such requests are made, including inquiries into founders, users, employees, or counterparties.

In a Tweet, the attorney notes that if the investigation relates to classifying ETH as a security, it would likely focus on aspects of the cryptocurrency itself, rather than any initial presale conducted by the Foundation in 2014.

According to Byrne, the statute of limitations would have expired in 2019, shifting the attention to more current operations and transactions within the Ethereum network.

Mike Selig, Asset Management partner at Willkie, points  out that it is not uncommon for crypto protocol foundations to receive information requests or subpoenas from regulatory bodies.

Industry Reactions Emerge

The SEC’s alleged probe has ignited a flurry of speculation and comparisons within the crypto community. Some commentators have drawn parallels with the ongoing legal challenges with Ripple. Users on Twitter also highlighted the contentious and often polarized nature of regulatory interventions in the crypto space.

Notably, theories have emerged regarding the timing and motivations behind the SEC’s interest in Ethereum. Some suggest external influences, including significant market players like BlackRock, could be at play.

Recently, BlackRock launched  its very first tokenized fund on Ethereum ,called the BlackRock USD Institutional Digital Liquidity Fund, or BUIDL for short. The fund lets investors make money in US dollars by joining the fund through a company called Securitize Markets, LLC.

Crypto influencer Toby Cunningham alleges  BlackRock influences the SEC as an institution. However, the allegations are mere speculation without much proof. And more documents could become public in the alleged investigation with time.

Is Ether a Security?

We will have to see the documents that allege the SEC investigation into Ethereum. At this point, it’s still unclear if the SEC is looking into the people and organization behind Ethereum or the network itself or the token Ether.

This difference is important because it could affect Ethereum’s future and the wider crypto market. Ethereum is the second biggest crypto and there’s a big decision coming up in May about an Ethereum investment fund.

About the Author

Shraddha Sharma

Shraddha has around five years of experience as a financial journalist, focusing largely on the Asian markets. Starting her career in Mumbai, India, as a news trainee and producer, she quickly found her niche in crypto. She is keen on learning how emerging technologies affect the broader markets and enjoys explaining complex financial ideas in a way that's easy to understand.

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