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House’s McHenry Accuses SEC Chief Gensler of Misleading Congress on Ethereum

Apr 30, 2024

As an analyst with a background in securities law and experience following regulatory developments in the cryptocurrency space, I believe that Rep. Patrick McHenry’s accusations against SEC Chair Gary Gensler are serious but may not be entirely accurate. While it is true that the SEC was investigating the nature of Ethereum’s ether before Gensler’s testimony, it does not automatically follow that the agency had made a definitive determination that ETH is a security.

Rep. Patrick McHenry, the head of the House Financial Services Committee, has levied accusations against SEC Chair Gary Gensler, claiming that Gensler misled Congress during a hearing by not disclosing that the SEC had previously considered Ethereum‘s ether to be a security.

As a researcher, I came across the statement released by McHenry where he claimed that Chair Gensler declined to answer queries concerning the SEC’s classification of ether during a recent interaction. However, new court documents suggest that this evasive response was deliberately intended to conceal or distort the commission’s actual stance on the matter.

The categorization of Ethereum (ETH), the second-largest cryptocurrency by market capitalization, remains a significant issue concerning the regulatory oversight of digital assets in the US. This debate is ongoing across various legal platforms. If ETH is deemed a security, subject to SEC registration and regulation, then numerous other tokens could potentially fall under the same classification.
In the documents we’ve recently uncovered for Consensys’ lawsuit against the SEC, there’s evidence suggesting that the regulatory body had initiated an investigation into Ethereum (ETH) prior to Chairman Gensler’s testimony in April 2023. Consensys is taking legal action against the SEC in anticipation of a potential enforcement action from the agency.

McHenry’s point implies that the investigation being carried out by the agency can be interpreted as a strong stance or standpoint on the issue.

As a researcher, I reached out to the SEC for their response regarding McHenry’s allegations, but they have yet to get back to me with a comment.

Based on the SEC’s manual for conducting investigations, Grant Gulovsen of crypto law fame explained to CoinDesk that an investigation is necessary to ascertain if any infringement of federal securities regulations has taken place or might be ongoing with regard to ETH. This determination doesn’t signify a formal ruling from the SEC regarding ETH’s categorization.
As a researcher, I concur with Consensys that if the Securities and Exchange Commission (SEC) were to classify all transactions involving Ethereum (ETH) as securities deals, it could have significant repercussions for the entire cryptocurrency sector. However, until the SEC makes such a determination officially, I believe it is premature to push the issue further. Gulovsen expressed this perspective.

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2024-05-01 01:07