According to a recent update on the Ethereum Foundation’s GitHub repository, the Switzerland-based non-profit organization responsible for the creation and ongoing development of the Ethereum blockchain is currently under investigation by an undisclosed “state authority.”
A GitHub commit made on February 26th states, “we have received a voluntary inquiry from a state authority, which includes a request for confidentiality.”
The Ethereum Foundation – the Swiss non-profit organization at the heart of the Ethereum ecosystem – is under investigation by an unnamed "state authority," according to the group's website's GitHub repository.
An attorney familiar with the situation said a Swiss regulator may…
— Crypto News Updates (@CryptoNewsUpd8s) March 20, 2024
However, it wasn’t until Wednesday, March 20th, that traders and cryptocurrency media outlets started to take notice of this development. As the news began to spread, the price of Ether came under pressure. ETH was recently trading at around $3,200, having previously reached as high as $3,400 before the news of the Ethereum Foundation investigation surfaced.
Investigating the Ethereum Foundation: Uncovering Its Origins.
According to a prominent attorney mentioned across several crypto-focused news platforms, there’s a notable suggestion that the ongoing inquiry into the Ethereum Foundation might potentially be instigated by the Swiss regulatory authority. This speculation further hints at the possibility of collaboration between this Swiss regulator and the United States Securities and Exchange Commission (SEC).
The SEC, in its current regulatory landscape, is actively evaluating numerous applications submitted by major financial entities on Wall Street aiming to introduce spot Ether Exchange-Traded Funds (ETFs). Notably, a significant cluster of pivotal decision deadlines set by the SEC falls within the month of May.
Despite the SEC’s approval of Ether futures ETFs last year, recent sentiment among analysts and within the market itself has shifted towards a more pessimistic outlook regarding the potential approval of spot Ether ETFs. Bloomberg’s esteemed ETF analyst, James Seyffart, has recently forecasted an ultimate denial of Ether ETF applications by the SEC in May.
My cautiously optimistic attitude for ETH ETFs has changed from recent months. We now believe these will ultimately be denied May 23rd for this round. The SEC hasn't engaged with issuers on Ethereum specifics. Exact opposite of #Bitcoin ETFs this fall. https://t.co/TyAzAOrAC5
— James Seyffart (@JSeyff) March 19, 2024
The absence of active dialogue between the SEC and Ethereum issuers regarding Ethereum’s intricacies is the reason behind this, as indicated by him.
This lack of communication becomes understandable if the SEC is collaborating with Swiss regulators in investigating the Ethereum Foundation, the entity responsible for Ethereum’s inception.
Although the SEC has yet to formally define its stance on whether Ether should be classified as a security, Gary Gensler, the Chair of the SEC, has consistently argued, even during his tenure at MIT, that Ether qualifies as a security issued by the Ethereum Foundation.
In 2015, the Ethereum Foundation conducted a presale of ETH tokens to finance the development of blockchain technology.
Is there a possibility of Ethereum (ETH) facing a ban?
When the Securities and Exchange Commission (SEC) gave the green light to Ether futures Exchange-Traded Funds (ETFs) last year, the prevailing interpretation was that the SEC recognized Ethereum (ETH) as a commodity rather than a security.
However, with the SEC investigating the Ethereum Foundation through collaboration with a Swiss regulatory body, concerns arise regarding the potential reclassification of ETH as a security by the agency.
Such a move by the SEC could compel US exchanges to remove ETH listings, facing accusations of operating as unlicensed securities exchanges if they fail to comply.
While it may be premature to assume that the SEC will indeed categorize Ether as a security solely based on an undisclosed regulator’s actions against the Ethereum Foundation, the possibility heightens associated risks.
Consequently, the recent decline in ETH price aligns with these uncertainties.
Focus now shifts to the upcoming Federal Reserve meeting, which could exacerbate downward pressure on prices should the Fed revise its expectations for the number of anticipated rate cuts this year.
Additionally, ongoing profit-taking following Bitcoin’s recent record highs continues to dampen market sentiment.
Notably, significant outflows from the Grayscale Bitcoin Trust (GBTC) pose a substantial obstacle, with Tuesday witnessing record-high negative net flows of $326 million into spot Bitcoin ETFs.
Bitcoin ETF Flow – 19 March 2024
All data in. Record net outflow of $326m pic.twitter.com/iBmBiMR74Z
— BitMEX Research (@BitMEXResearch) March 20, 2024
