Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC), is confident that all crypto assets based on the PoS consensus mechanism should be considered securities. This is the outcome of a positive result of the so-called Howie test, which has been officially used to classify securities since 1946. According to this test, assets are classified as securities if these three conditions are met:
- Financial investments are made in the expectation of making a profit.
- The beneficiary is an economically active company.
- Investors benefit from the efforts of a third party.
And this clearly applies to staking. Because when staking, asset holders (Eth) lend them to a cryptocurrency exchange or broker. They want to get a reward (profit) for this, because they have delegated their funds to staking, the Ether can be used to secure transactions by third parties on the network.
But why does the SEC think it should be responsible for Ethereum transactions?
Why should tokens and assets created worldwide using Ethereum fall under the jurisdiction of the U.S. Securities and Exchange Commission (SEC)?
Gensler has a surprisingly simple explanation for this. The vast majority of Ethereum transactions are confirmed through nodes that run on computers located in the United States.
Thus, for Gensler, the fact arises that almost all Ethereum assets are generated in the USA. Therefore, the American SEC body and the US jurisdiction are also responsible for this.
And Gensler suggests that “ALL” Ethereum transactions around the world should be considered American.
In fact, about 46% of all Ethereum nodes are currently in the US sphere of influence. Germany is in second place, with only 19%. The rest is distributed across many countries of the world.
And that`s true, almost 46% is the largest share, but still it is not even half of all transactions. And what does a transaction made by a Korean investor on a crypto exchange in Singapore and confirmed through an Ethereum node in Germany have to do with the United States and the SEC?
But Gensler is confident that the US courts will also follow his reasoning. An argument that would greatly facilitate the SEC’s work if it were simply declared that PoS crypto assets are equivalent to securities.
In addition, all transactions with Ethereum will be considered American and fall under the jurisdiction of the SEC.
Other experts` opinion
University of Kentucky law professor Brian Fire also fears that there will be supporters of such logic. Especially among those who do not understand exactly how blockchain systems and cryptocurrencies work, and imagine a simple explanation.
“I can imagine that the judges will take such a decision. Surely. Ethereum, in fact, is located in the USA, since it runs on several computers, and some of these computers are located in the States”, — said the professor of law.
According to Fire, the SEC’s work will be greatly simplified if all digital assets created on the Ethereum blockchain and using the PoS mechanism are treated as securities.