The Ethereum Foundation, the Switzerland-based nonprofit that created and continues to develop the Ethereum blockchain, is facing investigation by an unnamed “state authority,” the group’s GitHub repository says.
According to a GitHub commit submitted on February 26, “we received a voluntary inquiry from a government authority that included a requirement for confidentiality.”
The Ethereum Foundation — the Swiss non-profit organization at the heart of the Ethereum ecosystem — is being investigated by an unnamed “state authority,” according to the group’s website’s GitHub repository.
A lawyer familiar with the situation said a Swiss regulator could…
— Crypto News Updates (@CryptoNewsUpd8s) March 20, 2024
But traders and crypto media outlets only started picking up the news on Wednesday March 20th.
And as the news began to circulate, the Ether price came under pressure.
ETH last traded back around $3,200, after trading as high as $3,400 before the Ethereum Foundation investigation news broke.
Ethereum Foundation Investigation – Who’s Behind It?
One lawyer cited by several crypto news outlets suggested that the Swiss regulator may be behind the investigation.
Additionally, this regulator may work with the US Securities and Exchange Commission (SEC).
The SEC is currently reviewing several applications from major Wall Street firms to launch spot Ether ETFs.
Most of the key deadlines for the SEC to make a decision come in May.
But in recent weeks, analysts and the market have become pessimistic about approval, despite the approval of Ether Futures ETF last year.
Bloomberg ETF analyst James Seyffart recently predicted that Ether ETF applications will ultimately be denied in May.
My cautiously optimistic stance for ETH ETFs has changed from recent months. We now believe that it will finally be denied on May 23rd for this round. The SEC has not spoken to issuers about Ethereum specifications. The exact opposite of #Bitcoin ETFs this fall. https://t.co/TyAzAOrAC5
— James Seyffart (@JSeyff) March 19, 2024
This is due to a lack of engagement between the SEC and issuers regarding Ethereum details, he said.
Well, that lack of involvement makes sense if the SEC is working with Swiss regulators to investigate the Ethereum Foundation, Ethereum’s creator.
While the SEC has not laid out an official position on whether or not it considers Ether a security, SEC Chairman Gary Gensler has long argued (including during his time as a professor at MIT) that Ether is a security held by the Ethereum Foundation was issued.
The Ethereum Foundation sold ETH in a pre-sale in 2015 to fund blockchain development.
Will ETH be banned?
When the SEC approved Ether futures ETFs last year, it was interpreted by most as confirmation that the agency considers ETH a commodity, not a security.
But if the SEC is looking into the Ethereum foundation, via a Swiss regulator, it raises the risk that the agency could label it a security.
If the SEC does this, US exchanges will be forced to delist ETH. If they didn’t, the SEC would likely accuse them of operating as an unlicensed securities exchange.
Of course, it’s a big leap to assume that the SEC is about to call Ether a security just because an unnamed regulator served the Ethereum Foundation.
But it increases such risks.
In that sense, it makes sense that the ETH price has fallen.
Attention now turns to the upcoming Fed meeting, which could push prices further. This is as the Fed lowers expectations about the number of rate cuts it will make this year.
Profit-taking after Bitcoin hit all-time highs last week also continues to weigh on the market.
GBTC outflows are a particularly strong headwind. Net flows to spot Bitcoin ETF were negative $326 million on Tuesday, the highest on record.
Bitcoin ETF Flow – March 19, 2024
All data in. Record net outflow of $326m pic.twitter.com/iBmBiMR74Z
— BitMEX Research (@BitMEXResearch) March 20, 2024
Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and is not investment advice. You can lose all your capital.
Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
Ultimately, any crypto adventure you embark on is yours alone. We’re just happy to be your crypto companion, cheering you on from the sidelines (and maybe sharing some snacks along the way). So research, explore, and remember, with a little knowledge and a lot of curiosity, you can navigate the crypto cosmos like a pro!
UnCirculars – Cutting through the noise, delivering unbiased crypto news
