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United States Securities and Exchange Services (SEC) is one such financial regulator which is evidently strict on cryptocurrencies and related firms. Out of numerous cases, Ripple Labs vs SEC is perhaps the most famous one. The case started in 2020 since has seen gradual development with lots of ups and downs, the court soon to make a judgment though. Following the merge upgrade, Ethereum network turns proof-of-stakes and needs Ethereum staking in order to validate transactions. However, there are concerns on rise around Ethereum staking, if the native asset is a security or not.
The SEC claimed that prominent payment protocol Ripple Labs that the firm used native asset XRP worth 1.3 billion USD. Financial watchdog alleged XRP as an unregistered security and said the transaction between 2013 and 2020 illegal. The case is soon to come to an end where many expect the payment protocol firm’s win over the regulator.
Although the case of the Ripple vs SEC lawsuit has not been resolved yet, the crypto space started experiencing the rumors and speculations around Ethereum (ETH). It implies that if Ethereum (ETH) is not a security after being staking compliant, then the SEC would tail the biggest smart contract network native asset.
Howey Test is considered as a crucial test to check if an asset is a security or not. It falls under The Securities Act of 1933, which consists of three points. Any contract needs to be compliant with all the three requirements.
Obligations Under the Howey Test
The three requirements for an asset to pass through Howey Test includes:
- An investment of money
- Should fall under a common enterprise
- Contains ability to generate profit depending upon others’ efforts
While considering these requirements, Ethereum hardly satisfies one out of them, given that ETH could act as an investment since it poses a risk that defines an investment. Apart from this possibility, it would be tough for Ethereum to obligate the requirements of the security test.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
