SEC Indicates Shift Away from Ethereum in Recent Agreement with Crypto Platform eToro

The recent settlement involving eToro signifies a shift in the regulatory landscape for cryptocurrencies, with the Securities and Exchange Commission (SEC) deciding to discontinue offering various crypto assets except for Bitcoin, Bitcoin Cash, and Ethereum. While there has been a longstanding acknowledgment from regulators that Bitcoin and Bitcoin Cash should be treated as commodities rather than falling under the SEC’s jurisdiction, the treatment of Ethereum has been a point of contention.

Under the leadership of Chair Gary Gensler, who assumed office in early 2021, the SEC has embarked on an aggressive legal campaign against the crypto industry. This campaign intensified following the collapse of prominent projects like Terraform Labs and FTX in 2022. The SEC’s enforcement actions have targeted a wide range of crypto entities, including major exchanges such as Coinbase and Binance, as well as decentralized finance (DeFi) and non-fungible token (NFT) projects.

Central to the SEC’s legal actions is the debate over whether cryptocurrencies should be classified as securities, akin to stocks and bonds, or as commodities, like gold and oil. While previous regulators deemed Bitcoin decentralized enough to be excluded from this debate, Gensler has advocated for most cryptocurrencies to be treated as securities. Despite the SEC labeling several cryptocurrencies as securities in lawsuits, the agency did not take a definitive stance on Ethereum, the second-largest cryptocurrency by market capitalization.

The uncertainty surrounding Ethereum’s regulatory status led to speculation and controversy within the industry. In earlier reports, the SEC was reportedly considering declaring Ethereum a security, prompting investigations and potential enforcement actions. However, the agency’s stance appeared to shift following scrutiny from lawmakers, culminating in the approval of Ethereum exchange-traded funds (ETFs) without the inclusion of staking services, a crucial factor that could have classified Ethereum as a security offering.

The settlement with eToro, which penalized the platform for offering trading services for crypto assets deemed as securities while permitting Ethereum trading to continue, suggests a softening of the SEC’s stance on Ethereum’s regulatory classification. Yoni Assia, eToro’s co-founder and CEO, expressed minimal concern over the settlement’s impact on the company’s global operations, emphasizing a commitment to delivering innovative products in the US market.

While eToro looks ahead to advancing its business initiatives, the SEC declined to provide further comments beyond the public disclosures. The settlement with eToro serves as a pivotal moment in the ongoing regulatory discussions surrounding cryptocurrencies, particularly Ethereum, highlighting the evolving dynamics between regulatory oversight and the burgeoning crypto industry.