Bitcoin Bull and CEO of MicroStrategy Michael Saylor talked about Bitcoin, Ethereum, Cardano, and their asset classification in the United States. This topic has become more important since last month as Gary Gensler, chairman of the Securities and Exchange Commission (SEC), claimed that Bitcoin was the only commodity.
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According to these statements, other cryptocurrencies such as Ethereum and Cardano are at risk of being classified as securities. This can negatively impact each ecosystem as users, developers, and projects need to comply with tighter regulations.
In an interview with the popular YouTube channel Altcoin Daily, Saylor said Ethereum is “obviously” security. Sailor claims that Ethereum’s “constant” changes, the fact that it was released after an Initial Coin Offering (ICO), and the difficulty bombs made ETH secure.
The latter is a mechanism implemented on the Ethereum mainnet, which will gradually increase the difficulty of ETH mining. The network is moving from Proof of Work (Pow) to Proof of Stake (PoS) consensus protocol, and difficulty bombs will prevent miners from maintaining their previous blockchain.
Sailor explains why Ethereum is “obviously security”:
(Ethereum) There is a premine, there is a hard fork, there is a continuous hard fork, and it is difficult for the bomb to be pushed back. Difficulty bombs are trying to wipe out the entire ETH mining industry (…) The fact that someone can kill the entire industry and then they continue to change their minds about whether to do it (…).
According to the definition provided by Saylor, the goods are resistant to change. Security is constantly changing and there are entities that can control important decisions (difficulty bombs). Sailor concludes: If you can change your assets, it’s security.
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In that sense, executives said that most cryptocurrencies fall into this category and can approve the Howey Test, the mechanism used by the SEC to determine if an asset functions as a security.
Meanwhile, Sailor explained that there is no entity that can change the fundamentals of commodities such as gold. He explained that if an executive could change that characteristic, it wouldn’t be a commodity.
Within the next few months, as Ethereum completes its transition, the SEC and other regulatory agencies may be reluctant to classify Ethereum as security. ETH holders can bet assets and generate yields. Sailor explained:
SEC officials say that generating crypto asset staking on six different occasions makes it security. You can’t generate yields, you can’t be security (…).
Governance, which supports most decentralized finance (DeFi) protocols, is another transaction in which these projects function as securities. You cannot change the properties of the underlying asset by voting “Vote for something but not decentralized”.
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Saylor emphasized his claim, stating that in the case of digital assets, goods are unchanged and should not be changed or upgraded. He concluded that:
It’s a challenge in crypto space, in fact they are all securities. And the problem with that is that they are all securities traded on exchanges that are not licensed to trade securities (…). What happens (in cryptography) that no one knows? (…).