According to market cap, Ethereum is the second-biggest crypto in the world. However, a recent report of this crypto being under regulatory scrutiny led to a 6% fall. The report states that Ethereum’s creation originated from a ‘probably’ illegal securities sale in 2014.
A recent report by The Wall Street Journal states that regulators are considering treating cryptos like securities. This new development had an impact on the crypto market, especially the price of Ethereum, with prices dropping temporarily on May 1st, but then recovering later that day.
Commodities and securities watchdogs are wondering whether the regulations for stocks should be applied to cryptos as well.
Skepticism towards cryptos
As part of their report, The Wall Street Journal states that the creation of Ethereum in 2014 might have been an illegal securities sale. This is, at least, the belief of various regulators who are familiar with this matter.
ETH that currently has a market cap of $73 billion experienced a 6% fall Tuesday, as a direct consequence of the report. CoinMarketCap’s data stated that ETH’s price went down to about $652.
The basis of the report’s analysis is whether or not cryptocurrency founders have any control regarding their coins’ value. Similar to methods a company’s management might use to influence its stock price.
Different definitions regarding the nature of cryptocurrencies were given by two regulation agencies, with one of them (The Commodity Futures Trading Commission) naming them commodities, while the SEC labeled them as securities. The SEC wants to apply laws regarding securities on everything related to cryptos, from wallets to exchanges. They have been planning to do so since March.
The matter will be discussed further on Monday, according to the Journal, by senior officials from both CFTC and SEC.
Back in July 2014, the Ethereum foundation decided to raise over 31,000 BTC. Back then, this sum was worth at about $18.3 million. To raise the funds the foundation sold 60 million ETH. Investors believed that the value of this asset would rise, which is why the deal looked a lot like a securities sale, says the WSJ.
The Ethereum foundation made the coin Ether, and the Ethereum platform that can be used to create applications. The platform was built on blockchain technology, which is the same as what supports Bitcoin. In fact, developing the platform was the very reason for starting a fundraiser that led to the launch of Ether in the first place.
Ethereum blockchain has many potential uses, and many companies recognize this potential. This is why a consortium named the Enterprise Ethereum Alliance was formed, which aims to develop many of these potential uses. The Alliance includes companies like J.P.Morgan, as well as Microsoft.