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Ethereum’s supply on exchanges has dwindled, hitting an all-time low since it sprung into public existence in 2015. Investors scrambled to secure the asset, leaving only 10.3% of the current ETH on exchanges, as shown by Santiment.
This means ETH is being held in self-custody. In retrospect, the trend also indicates hodlers’ confidence.
This comes amidst CFTC’s civil complaint against Binance on March 27 where the regulator termed Bitcoin, Ethereum, and Litecoin as Commodities.
While Binance has vowed to come back with a full response to CFTC allegations, one cannot help but notice how regulators are not on the same footing over the classification of ETH.
Weeks before CFTC leveled charges against Binance, another leading crypto exchange Kraken was forced to shut down its staking services by the SEC which labeled Ethereum as a security.
United States Securities and Exchange Commission [SEC] chair Gary Gensler has steadfastly maintained that Ether is likely a security under U.S. law.
His comments shortly came after Ethereum completed “The Merge,” its shift to a proof-of-stake [PoS] transaction processing algorithm, last Sept.
Ethereum Commodity Or Security?
Without naming the asset directly, Gensler in a Senate Banking Committee told that digital asset exchanges and other online providers who offer PoS blockchain “staking services” act like lenders.
“From the coin’s perspective…that’s another indicia that under the Howey Test, the investing public is anticipating profits based on the efforts of others,” Gensler stated to the Wall Street Journal.
On the other hand, CFTC, in a court filing on 13 December 2022, insisted on calling ETH a commodity.
Post FTX, the regulatory body stated, “Certain digital assets are ‘commodities,’ including Bitcoin [BTC], Ether [ETH], Tether [USDT] and others, as defined under Section 1a(9) of the Act, 7 U.S.C. § 1a(9).”
As regulatory bodies grapple over the asset’s classification, the co-founder of Ethereum, Joseph Lubin, criticized authorities for comparing the ether to security and claimed that it was more comparable to a commodity like oil.
During a recent interview with CNBC, Lubin said he was “very confident” ether was not a security.
If it were treated as such, ether would need to be registered with regulators and subjected to much stricter requirements around pre-clearance and reporting. “Anyone can say anything, it doesn’t make it true,” Lubin told CNBC.