Gensler says Proof of Stake assets could be securities: Report – Decrypt

SEC President Gary Gensler said today that proof-of-stake cryptocurrencies can be securities, according to a report in The Wall Street Journal.

Gensler said that a proof-of-stake blockchain native asset, which allows holders to passively earn returns through staking, can pass the Howey test, The The Wall Street Journal mentioned Thursday. There are many such assets on the market currently, including CardanoAnd the SolanaAnd as of today, Ethereum—The second largest cryptocurrency by market capitalization.

The Howey test determines whether an asset qualifies as an “investment contract” and is therefore subject to federal security laws.

Under the test, an asset is considered an “investment contract” if investors pledge their money to finance an enterprise with the aim of making profits from its efforts. Gensler claims that proof-of-stake cryptocurrency can pass this test.

“This is another indication that under Howey’s test, the investing public expects profits based on the efforts of others,” The Wall Street Journal I mentioned to him saying.

Ethereum today he moved From being a Proof of Work coin to Proof of Stake.

Proof-of-stake blockchains work by having network participants “share” their coins — essentially locking up their cryptocurrency to process transactions and keep the network secure.

It is different from the proof-of-work cryptocurrency, such as Bitcoin, which is currently the top cryptocurrency by market capitalization, which uses a high-powered mining process.

If what Gensler says is correct, Ethereum’s historic move will mean that the asset is now likely to be called an “investment contract”, and therefore subject to securities laws. Gensler previously to reject To comment on Ethereum specifically but has He said He believes that Bitcoin is not a security. according to The Wall Street Journal.

Nonprofit Crypto Policy Center He said In a Thursday blog post, Ethereum’s move to proof of stake should not change how it is regulated. While Gensler declined to comment on Ethereum, his predecessors under the previous administration noted that The SEC did not believe that Ethereum was a guarantee.

Central to the rating as a safety is pivotal to ratings as a safety,” Coin Center said in a blog post today.

‘Both consensus mechanisms [proof-of-work and proof-of-stake] It is expressly designed to avoid any such adoption by creating open competition between outsiders where any self-interested participant can fill in the gap left by any other participant who is unresponsive, corrupt or censored,” the policy group said.

Earlier today at an oversight hearing by the Senate Banking Committee, Gensler repeat He believed that most cryptocurrencies were securities.

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