Is Ethereum (ETH) a security? This has been on the lips of every investor and crypto-trader since the Feds started asking the question early this month. Currently, there is a pending court case that could determine the classification of Ethereum as a security or not.
The jury involved will decide through ICOs – that have been reported as being scams and classified as defendants in the case – on the fate of all existing and future ICOs on the popular Ethereum platform. The case is based on existing securities regulations that are put in place to prevent fraud. But the question on every Cryto-trader’s mind is, can you really classify Ethereum or any crypto as a security? Do they even qualify? Are there even existing laws or definitions of digital assets in the text books of regular investing?
A security is defined as a tradable financial asset. The key word here is ‘tradable’. Where is it being traded. Per my understanding, it is being traded in SEC regulated stock exchanges. This does not apply to the crypto assets and ICOs. In my own personal opinion, which might be wrong, this case is null and void from the point of view of using Securities laws and regulation to try and arm twist a verdict. The definition of a financial asset supports this theory.
A financial asset is a non-physical asset whose value is derived from a contractual claim, such as bank deposits, bonds, and stocks. Financial assets are usually more liquid than other tangible assets, such as commodities or real estate, and may be traded on financial markets.
Cryptocurrencies cannot be categorized as financial assets unless laws and regulations are amended.
In a nutshell, the sudden indirect attack on Ethereum (ETH) through this case does not hold water. Perhaps the plaintiffs will have to plead their case using a different approach other than the securities regulations. Everyone gets into ICOs knowing the risks of doing so. There are numerous online guides on how to determine if an ICO is legitimate. It is all in the due diligence done prior to investing.
What this case can do, is set precedence for amendments to current laws and regulations to include digital assets.
That said, Ethereum is headed for greatness. Especially with the current buzz about solving the scalability issue using sharding. Sharding divides the mining network into a bunch of shards that can perform transactions in parallel, thereby increasing the throughput of the network.
That $2,500 per Ethereum is a high possibility by the end of the year.