A regulatory ‘grey zone’
Regulators have declared that Ether (Ethereum’s native currency) exists in a regulatory ‘grey zone’ according to sources cited by the WSJ. One major concern is how Ether was initially distributed.
A token sale of ETH took place in July of 2014, during which the Ethereum Foundation managed to pull in more than 31,000 BTC (about $18.3 million, at that time), in one of the very first ICOs ever launched.
Because the money raised was subsequently used to develop Ethereum’s platform, which now houses countless tokens, programs, and smart contracts, the WSJ claims regulators are concerned that the ‘ICO’ was in fact a securities sale and, as such, Ether should be registered with the SEC as a security and subject to legislation.
The point was made that many investors likely donated BTC to the Ethereum cause in the hope that the cryptocurrency would one day rise in value which, again, suggests that Ether should be classed as a security rather than a digital asset.
If Ether is deemed a security, then under U.S. federal law it should have been registered as such with the SEC in 2014 before being sold to US investors, the WSJ points out.
Regulators are reportedly also studying whether or not the Ethereum Foundation continues to wield influence over the coin’s value.
“No legal precedent”
“There is no legal precedent [for Ether],” former U.S. government regulator Gary Gensler told the WSJ.
Gensler also said in a speech last week that ‘there is a strong case’ Ether may be what’s called a ‘noncompliant’ security. This means a security that was not registered with the SEC.
However, Gensler said that because Ether coins are now mined, the altcoin may be able to avoid a securities classification.
The Ethereum Foundation claims it does not control the supply or demand of ETH and owns less than 1% of the amount in circulation.
Ethereum to the moon
At time of writing, Ether is trading at $685.83 (£502.30), up 1.73% in 24 hours, according to data from CoinDesk.