SEC Restricting Innovation and Holding Back Ethereum’s Potential in Banking: Joseph Lubin
Joseph Lubin, co-founder of Ethereum, heavily criticized the Securities and Exchange Commission (SEC) on May 9, accusing the regulatory body of intentionally hindering innovation and impeding Ethereum’s transformative capabilities in the banking sector.
During his speech at FT Live’s Crypto and Digital Assets summit in London, Lubin voiced his concerns about the SEC’s approach, claiming that instead of promoting open dialogue and providing clear regulatory guidelines, the SEC has chosen to enforce regulations strategically, creating uncertainty within the cryptocurrency industry.
“It seems like the SEC doesn’t want to see a wave of innovation that could truly revolutionize the industry,” Lubin stated.
Lubin’s comments were made in response to ConsenSys’s decision to sue the SEC after receiving a Wells notice from the regulator. Lubin argued that the SEC’s actions, such as reclassifying Ether as a security without transparent communication, were meant to instill fear and doubt, potentially pushing cryptocurrency companies to move offshore.
“The SEC seems to have reclassified Ether as a security without informing anyone about it,” Lubin said. “Instead of engaging in open dialogue and establishing clear rules, they are taking a series of strategic enforcement actions.”
Central to Lubin’s critique is the suspicion surrounding the SEC’s motives, particularly regarding its recent enforcement actions against Ethereum. Lubin suggested that the SEC’s heightened scrutiny is driven by the impending decision on approving Ether spot exchange-traded funds (ETFs), as the SEC fears the potential influx of capital into the Ethereum ecosystem.
“We believe that there is a flurry of activity aimed at allowing them to justify their actions in case they reject the Ether spot ETFs,” explained the Ethereum co-founder.
In Lubin’s opinion, the SEC’s reluctance to embrace Ethereum’s advancements in scalability and usability stems from a desire to maintain the status quo and a fear of the transformative impact that decentralized finance (DeFi) could have on the banking industry.
“I think they are concerned that our ecosystem, which is continuously improving in terms of scalability and usability, will attract significant attention and capital,” he added.
Lubin further argued that the SEC’s aversion to innovation reflects a broader resistance to adapting to emerging technologies, potentially hindering the growth of the cryptocurrency sector.
Additionally, Lubin cautioned against the SEC’s efforts to classify platforms like Coinbase and MetaMask’s wallets as broker-dealers, warning that such actions could set a dangerous precedent and stifle innovation across the technology sector.
“We disagree on whether MetaMask should be registered as a broker-dealer,” he stated. “If every MetaMask user has to register their wallet as a broker-dealer, it would have a chilling effect.”
SEC Likely to Reject Spot ETH ETFs
The SEC recently decided to postpone its decision on the proposed Invesco Galaxy spot Ethereum exchange-traded fund (ETF). The new deadline for the decision is July 5, 2024. The SEC stated that additional time is needed to thoroughly review the proposed rule change and associated issues.
Similarly, Franklin Templeton’s application for a spot Ethereum ETF also faces an extended delay, with the SEC pushing the decision deadline to June 11, 2024.
Several other issuers, including BlackRock, 21Shares with Ark, Fidelity, Grayscale, VanEck, Hashdex, and Franklin Templeton, have filed applications for Ethereum ETFs, creating anticipation in the market.
Initially, market analysts speculated that the SEC would make a final decision on spot Ethereum ETF applications in May, coinciding with the deadlines for various asset managers’ submissions.
However, the recent delays announced by the SEC have dampened these expectations. Bloomberg Intelligence analyst James Seyffart expressed skepticism, suggesting that the current round of Ether ETF applications might face rejection, which would alter the landscape for Ethereum investment options in the US.
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