Is Ethereum going to be a security in the U.S.?

After the Ethereum Merge, PoS cryptocurrencies could be viewed as securities in the U.S. in the future, says SEC chief Gary Gensler.

After the Ethereum Merge, PoS cryptocurrencies could be seen as securities in the U.S. in the future, says SEC chief Gary Gensler.

The successful shift of Ethereum to the Proof of Stake consensus mechanism could bring new regulatory hurdles for the second-largest cryptocurrency. Gary Gensler, head of the U.S. Securities and Exchange Commission (SEC), said on the sidelines of a congressional hearing that cryptocurrencies and firms offering users "staking" could fall under securities regulation in the U.S. in the future and thus under the SEC's oversight.

In a conversation with the Wall Street Journal, Gensler compared the profits from staking to dividends from the traditional financial sector. The deciding factor for whether a financial product is considered a security in the U.S. is the so-called Howey test. This is a framework established by the Supreme Court to determine to what extent a transaction may be viewed as a capital investment and thus as a security.

According to Gensler, PoS-based cryptocurrencies could pass the test. So far, both the SEC and the Commodity Futures Trading Commission (CFTC) have classified Ethereum as a commodity. How the merger might change the definition of U.S. authorities, however, remains open for now.