SEC Says PoS Assets Could Be Securities

PoS Assets

Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC), said that Proof-of-Stake cryptocurrencies could be securities, repeating an extra-cautious attitude and consumer pragmatism in the wake of the Ethereum Merge.

According to Gensler, the native assets of proof-of-stake blockchains, which allow holders to passively earn returns through staking and writing transactions, could pass the Howey test and qualify as securities. He did not pinpoint a specific coin, given that there are many such assets currently in the market, including Cardano, Solana, and the second-biggest of all, Ethereum.

Gensler claimed that proof-of-stake cryptocurrencies could pass the Howey Test and said that “that’s another indicator that under the Howey test, the investing public is participating (in) profits based on the efforts of others.” 

The Howey test sets out the criteria for an asset to qualify as an “investment contract” and the answering in affirmative would subject the asset to federal security laws. The asset will be considered an  “investment contract” if investors pledge their capital to fund an enterprise with the intention of making profits from its efforts. 

Coin Center, Crypto policy non-profit, said in a Thursday blogpost that Ethereum’s move to PoS should not change how it is regulated. The center did not believe that the technological differences between PoS and PoW warrant any differential treatment. The economic realities of validating a chain through mining and validating a chain through staking are also similar.

“Both consensus mechanisms expressly designed to avoid any such dependence by creating an open competition between strangers, in which any self-interested participant may fill in the gap left by another unresponsive, corrupt, or censorship participant.” the Center said.

Gensler previously said that he believes Bitcoin is not a security, but has refused to comment on Ethereum specifically. Nevertheless, his predecessors unde the previous administration had signaled that the SEC did not believe Ethereum was a security.

Earlier today at the SEC oversight hearing by the Senate Banking Committee, Gensler reiterated his view that most crypto currencies are securities.

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what can blockchain do

What Can Blockchain Do?

In many people’s minds, cryptocurrency and blockchain are synonymous with one another. Although closely related, they are not one and the same, and it is

Read More »