SEC chairman warns merger update could turn ETH into a stock

As the world watched the Ethereum blockchain undergo the most significant transition to Proof-of-Stake (PoS) on Thursday, SEC Chairman Gary Gensler was also paying attention to developments.

Shortly after the Merge event on Thursday, Sept. 15, SEC Chairman Gary Gensler said that crypto assets and intermediaries that allow users to “bet” will have to pass the Howey test to determine whether or not this asset is a security. The Howey test determines whether investors expect a return from the work of others.

After the congressional hearing on Thursday, the SEC chairman told reporters, “From the standpoint of the play…this is another indication that, under the Howey test, the investing public anticipates profits based on the efforts of others“.

However, Gensler clarified that he was not referring to any crypto-currency at this point. But the announcement that will be made shortly after the merger upgrade could make a splash, as the WSJ reports.

The SEC has been very clear about including digital assets in the securities laws, especially crypto-currencies sold with a promise of future profits.

What’s going on with crypto-currency staking?

Even before the Ethereum merger, the proof-of-acceptance (PoS) model was very popular for staking crypto-currencies as a way to verify blockchain transactions.

The SEC chairman said that in case the crypto exchange offers staking services to its customers, it “is very similar – with some labeling changes – to lending“. Gary Gensler has repeatedly stated that companies that offer crypto-currency lending products must register with the agency.

However, the crypto-currency bill introduced by the Agriculture Committee last month states that bitcoin and ethereum should be treated as commodities. Earlier this month, a report indicated that the CFTC would handle crypto-currency exchanges operating in the country, and Gensler agreed with that. However, the CFTC would need additional infrastructure and tools to properly regulate the crypto-currency market.