The US Congress may put ethereum (ETH) in a new category with less burdensome regulations than securities or group it with bitcoin (BTC) as a commodity, JPMorgan strategists suggest. The theory arises after the SEC’s ongoing debates on Ethereum’s nature as a security.
As debates around crypto regulations persist, ethereum stands at a regulatory crossroads.
The Block reported that a novel prediction from JPMorgan strategists, led by Nikolaos Panigirtzoglou, suggests that Congress might classify ethereum differently from its current status.
Instead of tagging it along with bitcoin as a commodity, Ethereum might land in a new ‘other category’, potentially bearing fewer regulatory burdens than securities.
Understanding the ‘Hinman Documents’
The “other category” concept originates from the Hinman documents recently revealed in an ongoing SEC enforcement lawsuit against Ripple Labs.
The documents date back to a 2018 speech by Bill Hinman, the then director of the SEC’s Division of Corporate Finance, arguing that Ethereum was not a security due to its “sufficiently decentralized” nature.
However, these documents also reveal particular concerns raised by some SEC officials, pointing out that classifying tokens on a sufficiently decentralized network as non-securities might create a regulatory gap. The “other category” was first mentioned as a potential solution.
Interestingly, SEC Chairman Gary Gensler has refrained from clearly stating whether he considers ether security.
His previous statements suggest that all cryptocurrencies besides bitcoin could be considered securities, yet he hasn’t directly addressed ethereum’s status following the ‘Hinman documents’ release.
Potential impact on ethereum
JPMorgan’s strategists suggest that the Hinman documents might strengthen ethereum’s argument against being labeled as a security. However, they note this won’t directly affect Ripple, which is currently involved in a lawsuit with the SEC.
Yet, if Ripple successfully argues that they weren’t given fair notice about being classified as a security, it could impact the SEC’s future enforcement actions. Other crypto entities might use this precedent to argue they weren’t given fair notice.
