Now that Ethereum is considered a commodity rather than a security, Ethereum dapp builders can relax knowing that their tokenized networks or blockchains can transition from centralized to decentralized without facing opposition or bureaucratic hurdles. Ethereum is officially recognized as a protocol, not a company, by regulators.
Unlike Ethereum, which recently obtained commodity status, Bitcoin has been classified as a commodity since 2014. The approval of spot Ethereum ETFs on major exchanges has been a lengthy and complex process.
The recent approvals have provided relief to many cryptocurrency founders. The SEC approved the application based on rules for commodity-based trust shares, avoiding the need for compliance with the Investment Company Act of 1940. This shift implies that Ethereum is now viewed as a commodity rather than a security.
While SEC Chairman Gary Gensler believes that most digital assets are securities, former SEC Chairman Jay Clayton argues that Ethereum’s decentralization qualifies it as a commodity like Bitcoin. The Approval Order for Ethereum ETFs suggests that Ethereum itself is a commodity, which could have significant implications in future court cases.
The SEC has faced pressure from various stakeholders to categorize Ethereum as a commodity. Despite disagreements within regulatory agencies, the head of the Commodities Future and Exchange Commission (CFTC) asserts that Bitcoin and Ethereum fall under his agency’s jurisdiction.
Consensys plans to continue its lawsuit against the SEC, citing the approval of Ethereum ETFs as evidence of Ethereum’s commodity status. The company accuses the SEC of inconsistency in its approach to digital assets.
Discovery in the lawsuit revealed a secret SEC investigation into Ethereum’s security status, while institutions like VanEck support Ethereum’s classification as a decentralized commodity rather than a security.
Although staking Ethereum was not included in the ETF approval, sponsors may submit a rule change proposal for SEC consideration. Staking involves locking ETH in a smart contract to validate transactions and add blocks to the blockchain, potentially paving the way for future SEC approval.
Ethereum’s maturity and similarities to commodities played a role in its ETF approval, with the CME’s monitoring of ETH futures markets contributing to regulatory confidence. The approval highlights the evolution of digital assets from securities to commodities.