Regulatory Scrutiny Threatens Ethereum’s Rise, Will It Succumb Under Pressure?


Ethereum has seen increased regulatory scrutiny in recent months. This comes after the network moved to a Proof of Stake mechanism and introduced staking for others. As protocols like Tornado Cash are being sanctioned, it is increasingly possible for regulators to shift their focus to Ethereum. Now, it appears that parameters are hashed to determine which jurisdiction falls under ETH.

Ethereum may be a guarantee

Previously, Securities and Exchange Commission Chairman Gary Gensler said that the two largest cryptocurrencies, Bitcoin and Ethereum, did not qualify as securities. But this was when these two networks were still operating firmly under a proof of work mechanism.

With Ethereum moving to Proof of Stake, the SEC has begun to retract earlier comments that Ethereum did not qualify as collateral. This explains that since there is a possibility to bet on the network now, investors are currently “expecting profits based on the efforts of others”. This makes him pause to say that the digital asset may now qualify as collateral. It also follows the view of the Chairman of the Securities and Exchange Commission (SEC) that most cryptocurrencies currently operate as securities.

Meanwhile, the impact of the Ethereum designation as collateral by the regulator has a lot of implications. Most notably, there are more ETH nodes operating in the US than in any other country, which means that the vast majority of transactions will fall under the SEC’s jurisdiction.

Ethereum price chart from TradingView.com

Ethereum struggles to hold above $1,300 | Source: ETHUSD on TradingView.com

However, since these assets are not yet classified as securities, there has been further speculation as to what they might be classified as. The CFTC was previously called to regulate the crypto industry, and Chairman Rustin Behnam said that digital tokens are commodities and that the CFTC should be able to regulate them.

Will ETH survive scrutiny?

Ethereum can be regulated by any of these regulators in a number of ways. At the moment, it is expected that regulators will soon come out with a final classification of the digital asset and then put in place measures to regulate it as such. However, the price is likely to be affected by this.

Sanctions on crypto-mixer Tornado Cash have ETH investors on the edge of their seats. Adding more regulation to ETH could bring down the price of the cryptocurrency. ETH is already struggling to hold above $1,000, and any regulatory action will likely send its price below $1,000.

Such a move against Ethereum will also have a huge impact on the rest of the decentralized finance (DeFi) and NFT market, leading to a rapid drop in values ​​across the space. In the end, the winner will be assets like Bitcoin, which is truly decentralized and will serve as a safe haven for crypto investors.

Featured image from BeInCrypto, chart from TradingView.com

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