New Money Is On The Way To Ethereum, This Is Why
Ethereum’s value skyrocketed over the last week as new money floods into the next-generation blockchain. The coin is testing the $800 level for the first in two moths and headed higher, perhaps as soon as next week. The reason is a working-group style meeting between officials from the SEC, Securities and Exchage Commission, and CFTC, Commodities and Futures Trading Commission. The group’s purpose; to determine the status of Ethereum. Is it or is it not a security?
The SEC has already proclaimed that ICO’s, initial coin offerings, are securities and are to be regulated under applicable law. If the committed decides that Ethereum, and Ripple as well, are securities it could have wide ranging impact on the market. First it would make Ethereum, the Ether network and its founders noncompliant with SEC and CFTC regulation. Second, it could severely limit access to Ethereum in the US.
Ethereum co-founder Joseph Lubin told The Street that the Ether team was concerned with this possibility from the very beginning. They worked closely with lawyers to ensure that Ethereum was not a security and is confident the committee will not decide to regulate it as one. “We spent a tremendous amount of time with lawyers in the U.S. and in other countries, and are extremely comfortable that it is not a security; it never was a security”.
Unfortunately there are those on the committee that disagree. Gary Gensler, Chairman of the CFTC’s regulatory arm, sees a strong case for both Ethereum and Ripple to be classified as securities. The question is, can the two pass the Howey Test? The Howey Test has long been used by the SEC and asks the questions; is it an investment of money, is there an expectation of profits, is it a common enterprise, and do the profits come from the efforts of a third party.
While debatable it seems clear that Ethereum is not a security. It is not an investment because there are no corporate earnings, no profits and it doesn’t pay a dividend. Any expectation of profits are due to the efforts of the trader, not a third party, and are by no means guaranteed. Whether the SEC/CFTC working-group agree is yet to be seen. The good news is that members within the group have already suggested a type of “do no harm” registration which would provide a much needed vote of confidence for the industry while doing minimal damage to the market.
Regardless, Ethereum is on the rise. The token is supported by a number of positive catalysts within the greater cryptocurrency world including broadening regulation and wider mainstream acceptance. I expect to see the token ETH/USD test the $975 in the near term and then move up to retest the all time high by mid-summer.