SEC Chairman Explains Why PoS Tokens Are Securities
SEC Chairman Gary Gensler explained why Proof-of-Stake (PoS) tokens are securities
Gary Gensler urged "operators" of Proof-of-Stake protocols to register their tokens under US law
SEC Chairman Gary Gensler explained why Proof-of-Stake (PoS) cryptocurrencies should be considered securities under U.S. law, reports The Block.
Proof of Stake (PoS) is the algorithm on which blockchains such as Ethereum, Cardano, Solana, Tezos, and Algorand operate. This mechanism does not use the processing power of miners to validate transactions, but coins in staking provided by validators.
According to Gensler, the returns that token holders receive from stacking, and the fact that a small group of people is often the "operators" of the tokens, indicate that these digital assets are securities and must be registered as such under U.S. law.
"Investors invest money expecting to get a return on PoS tokens, they expect to get a return of 2%, 4%, or 18%. Regardless of what exactly the protocol promotes, often run by a small group of entrepreneurs and developers, I would simply suggest that each of these token operators strive for compliance, and the same goes for intermediaries," Gensler said.
Gensler thus commented on statements made on March 8 by U.S. Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam, who expressed his own and his agency's view that Ethereum is a commodity.
"Penalties will definitely continue": what else will the SEC punish the crypto market for
In early February, the SEC took its first enforcement action against stacking as a service, banning it at the cryptocurrency exchange Kraken. The regulator accused the platform's operators of failing to properly register the stacking program as a service, under which investors submit crypto assets to Kraken for placement with the goal of generating up to 21% annual returns.
As part of the settlement of the case, the exchange agreed to immediately stop stacking for U.S. users and pay a $30 million fine. However, the U.S. authorities' pressure on the stacking services didn't end there.
According to the prosecutor's office, James' lawsuit is one of the first cases in which a regulator has argued in court that Ethereum is a security.
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