Unrealistic demands? Crypto Figure Says Consensys Might ‘Need Prayers’
One crypto figure deemed Consensys’ demands unrealistic amid the discussions.
Ethereum (ETH) has faced some regulatory turmoil amid rumors of a rejection of ETH spot exchange-traded funds (ETFs) in May.
The second-largest cryptocurrency has also been in the spotlight after a key component of its ecosystem, Consensys, sued the US Securities and Exchange Commission (SEC) for “unlawful appropriation of authority” over the asset.
The lawsuit sparked different conversations, including SEC regulatory inconsistencies and speculation about the relationship between the US agency and people close to Ethereum.
Does Consensys Need Prayers?
On April 25, blockchain software company Consensys filed a lawsuit against the US SEC, seeking a court ruling declaring that ETH is not a security. The news opened widespread discussion among members of the crypto community about the implications of the lawsuit. Additionally, it reignited the discussion over ETH Gate, in which Ripple CTO David Schwartz and Cardano founder Charles Hoskinson had a heated exchange over X.
Pseudonymous crypto detective Dr. Huber shared the “Prayer for Relief” section of the lawsuit, stating that the software company “really needs some prayers.” In addition to classifying Ethereum as a non-security, Consensys is praying for the court to declare that any investigation or enforcement by the company into ETH transactions classified as a security would exceed the authority of the SEC.
Similarly, the firm demands that any action against the company based on its operation as a “broker” under the Exchange Act through its MetaMask wallet be outside the SEC’s authority.
Additionally, Consensys is seeking a “permanent injunction prohibiting the SEC and its officers and agents from conducting any investigation or enforcement action” related to the staking trading features of its MetaMask software.
According to the crypto figure, the possibility of a court granting a company and its subsidiaries “a general and permanent free pass for life against SEC Securities investigations” is minimal.
The crypto detective believes that the approval of Consensys’ applications would mean that “no ETH transaction could ever be considered an offering of securities,” which reduces the likelihood of a ruling in favor of the company.
Unclear Regulatory Framework for Cryptocurrencies
The regulator’s classification of Ethereum is one of the issues where clarity is lacking. Under former SEC Chairman Jay Clayton, the second-largest cryptocurrency was not considered a security.
Additionally, in his 2018 speech, former Director of the Division of Corporate Finance Bill Hinman classified Ethereum and Bitcoin as non-securities. However, recent reports allege that the regulator has considered ETH an “unregistered security” for over a year. The SEC has apparently been investigating the status of cryptocurrencies with an “unusual secrecy” since March 2023.
The final classification of digital assets as securities could have significant implications for the cryptocurrency industry. The Consensys lawsuit has highlighted the SEC’s unclear regulatory framework.
The agency’s inconsistency was pointed out by Financial Services Committee Chairman Patrick McHenry. In a statement Tuesday, Chairman McHenry claimed that current SEC Chairman Gary Gensler “knowingly misled Congress.”
According to the statement, Gensler refused to answer questions about the SEC’s classification of ETH, showing an “intentional attempt to misrepresent the Commission’s position.”
Gensler further added that “An adverse ruling would contradict previous SEC guidance and expand the agency’s regulatory oversight. Similarly, I would also question the Commodity Futures Trading Commission’s (CFTC) classification of the asset as a commodity. Ultimately, it would show “yet another example of the arbitrary and capricious nature of the agency’s regulation through the law enforcement approach to digital assets.”
By Audy Castaneda