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SEC Probing Crypto Firms to Classify Ethereum as a Security: Fortune Reports

According to a recent article from Fortune, the United States Securities and Exchange Commission (SEC) is said to be issuing subpoenas to multiple U.S. companies as part of a concerted effort to officially categorize Ethereum as a security.

Crypto Firms Subpoenaed By SEC in Connection With Ethereum Foundation

Per a report by Fortune’s Leo Schwartz and Jeff Roberts, three prominent cryptocurrency firms have recently been served subpoenas by the federal agency for information regarding the Ethereum Foundation, a non-profit entity supporting the Ethereum ecosystem.

As mentioned in the article, an unnamed employee from one of the subpoenaed firms asserts that the investigation commenced shortly after Ethereum transitioned to its new proof-of-stake model in September 2022.

This development from the SEC comes in the wake of a report by CoinDesk on Tuesday, suggesting that the foundation is under investigation by a “state authority” after a GitHub commit from the company dated February 26, 2024.

In a similar vein, the Switzerland-based foundation removed its canary warrant, indicating that it had never faced a confidential government inquiry, on the same day.

Ethereum as a Security Stance by SEC Stalls Ethereum ETF Outlook

Previously, the SEC had maintained silence regarding its stance on an Ethereum ETF, despite approving several spot Bitcoin ETF applicants in January 2024.

Just last month, analysts had speculated a 50% likelihood of SEC approval for the token by May. However, the revelation that SEC Chair Gary Gensler is actively pushing to classify Ethereum as a security has significantly diminished those prospects.

In a recent post on X, Eric Balchunas, Senior ETF analyst for Bloomberg, remarked that the odds were now “not looking good” for the token’s SEC approval, following a downgrade to a 35% approval prediction from the previous week.

Similarly, James Seyffart, another Bloomberg ETF analyst, expressed in an X post that both researchers now anticipate the federal agency’s rejection of Ethereum ETFs in May.

The Bloomberg analysts attributed this projection to a lack of engagement from the SEC with potential issuers, describing it as the “exact opposite” of the commission’s approach leading up to spot Bitcoin ETF approval.

Gensler Put On Blast By U.S. House Committee on Financial Services

SEC Chair Gary Gensler has come under heightened scrutiny for his management of the federal agency, prompting the U.S. House Committee on Financial Services to conduct a hearing on Wednesday to explore potential reforms for the commission.

In his testimony on Wednesday, Congressman French Hill (R-LA) asserted that under Gensler’s leadership, the SEC had “blatantly and repeatedly” exceeded “its statutory authority.”

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I want to save money. Will cryptocurrency work?

Cryptocurrency is essentially virtual money that operates in a decentralized manner, not through a bank but directly on multiple independent computers.

Every cryptocurrency has two main components: the units of digital exchange called “coins” and the network within which the exchange takes place. These units can be transferred between wallets and exchanged on exchanges. The networks in which these coins exist are called blockchains, which translates to “chains of blocks.”

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