Twitter founder Jack Dorsey has sparked controversy by referring to Ethereum (ETH) as security.
On June 6, in response to a Twitter user asking if ETH is a security, Jack Dorsey, the CEO of Square Inc and a prominent Bitcoin supporter, controversially answered “Yes.” This statement implies that holders of ETH should adhere to the regulations imposed by the Securities and Exchange Commission (SEC).
Dorsey commented while agreeing with Pierre Rochard, Vice President of Research at Bitcoin mining company Riot Platform who tweeted that Coinbase should pivot back to supporting Bitcoin and ignore other altcoins.
Dorsey has been vocal about Bitcoin’s potential to revolutionize financial systems, believing that it can facilitate a more equitable financial landscape. In a separate tweet, the businessman praised Bitcoin again terming it as one of the few censorship-proof tools today, leaving out Ethereum.
“There are only three truly censorship-resistant technologies at scale today: tor, bitcoin, and nostr. All are currently niche…showing most of the world doesn’t actually care about censorship. Granted, these technologies aren’t yet accessible or easy to use. But…they will be!”
Dorsey’s statement arrives during a period of heightened regulatory scrutiny towards cryptocurrencies with the SEC suing Binance and Coinbase for allegedly breaking US securities laws.
Gary Gensler, the chairman of the SEC, has repeatedly expressed that tokens like Ethereum are sold as investments and could potentially fall under the category of investment contracts or securities according to federal securities law. However, despite the agency’s enforcement actions against various tokens and influencers involved in promoting unregistered securities, the agency is yet to release an official statement regarding Ethereum’s classification as a security.
Notably, the ongoing debate regarding the classification of Ethereum as a security or not remains a contentious issue, especially in light of statements made by former Finance Director Bill Hinman in 2018 that Ethereum is not a security. The ongoing legal battle between the SEC and Ripple has highlighted this issue, as Ripple seeks to leverage Hinman’s statements on Ethereum to support its argument that XRP should not be classified as a security either.
That said, while many in the crypto community believe Ethereum is not a security, some have suggested otherwise. In a tweet on June 7, Gabor Gurbacs, a strategy adviser to Tether and VanEck suggested that the cryptocurrency may have become a security after transitioning from the proof of work (POW).
“ETH was based on Proof of Work then. Transitioning to POS may have changed the fact pattern. Also sufficiently decentralized is not the only factor to determine whether a token is a security or not,” he wrote.
Meanwhile, as the cryptocurrency community eagerly awaits regulatory clarity on Ethereum’s classification as a security, the ultimate decision rests with the commission or the courts after considering all relevant factors.