We note that the prospect of recognising a digital asset as a security is a nightmare for every blockchain developer. In such a case, regulators will have the opportunity to pick on the details of the project launch and charge the developers with an unregistered offering of securities. This requires special registration, and it is not easy to obtain.

The SEC’s power was proven today. Thanks to the SEC’s efforts, cryptocurrency exchange Kraken has shut down staking for US citizens on the Kraken exchange. According to the agency, steaking involves the promise of income, which means the process itself is allegedly also considered a security.

SEC chief Gary Gensler

Naturally, such arguments seem to be very weak, and well, the SEC’s regulatory framework may be considered outdated and irrelevant to digital assets. But that’s not stopping the regulator’s representatives.

What will happen to Etherium?

When asked by Cointelegraph reporters about the possibility of Ether being recognised as a security, Lubin replied with the following quote

I think it is just as likely and would have the same impact as if Uber was made illegal. This would cause a huge backlash not only from the cryptocurrency community, but also from various politicians and some regulators.


This is not the first time Lubin himself has commented on the subject of Etherium this week. Earlier, he named ETH's main achievement in this bearish cycle. According to the expert, the cryptocurrency showed excellent price performance during the drawdown phase. Still, there was not much willingness to sell ethers cheaper than $1,200 - and this shows the faith of investors in the prospects of the asset.


Etherium co-founder Joe Lubin

In September, U.S. Securities and Exchange Commission head Gary Gensler suggested that ETH’s move to a Proof-of-Stake consensus algorithm could put the cryptocurrency in the crosshairs of regulators. Staking, he said, gives the “investing public” an expectation of “returns based on the efforts of others”, which could allegedly be correlated with securities classification.

It should be noted that steaking does produce income, and the approximate level of the latter can be known at any time. However, in this case, money does not appear out of thin air: we are talking about issuing a certain token in accordance with a precise schedule and predetermined volumes. Stackers, on the other hand, help the network work by confirming new transactions and the current state of the blockchain.

Here is a list of the coins that support stacking, and next to them is the annual return on this activity. It is important to understand that the figure can vary, and depends on the number of participants in the network. After all, cryptocurrency issuance has a fixed rate, so if the number of steakers grows, the same reward will be distributed among more people, which will cause the reward level to sag.

Annual yields of staking popular cryptocurrencies today

Lubin, as one of the co-founders of Etherium, has been privy to discussions with the US Securities and Exchange Commission as well as the Commodity Futures Trading Commission (CFTC) “for many years”. About five years ago, he says, regulators were “just trying to figure out what tokens are”. Here’s Lubin’s relevant rejoinder.

Back then, they thought it was all securities. We helped them understand that many tokens are not securities, but now Gary has brought it up again.

Note, Gary Gensler's very activity is quite comical. As is commonly believed in the cryptocurrency community, the official does not at all help investors save money because of the activities of various dubious companies like FTX, Three Arrows Capital and Terra. Instead, he is going after normal projects and trying to slow down the development of crypto in general - at least this is relevant to the US.

Etherium exchange rate over the past 30 days

Also worth remembering here is the US Securities and Exchange Commission’s attempt to have Ripple’s XRP recognised as a security. A lawsuit was filed against the latter in late 2020, with the regulator having made no progress since then, and Ripple expects to conclude the proceedings this year – and with a victory.

Etherium is far more decentralised than XRP. That makes the prospect of ETH being recognized as a security even less believable.

In addition to increased regulatory scrutiny, 2022 has also been a tough year for the Etherium ecosystem due to a general market decline. According to a report from analyst platform DappRadar, the capitalisation of the Eth-based NFT sphere fell by almost 60 per cent: from $9.3 at the start of the year to $3.7 billion at the end. Capitalisation peaked in February 2022, when the figure stood at $19.1 billion.

Already after the collapse of crypto exchange FTX at the end of November, NFT’s capitalisation on Etherium reached a year’s low of $2.2 billion. However, already in December the figure was up 68 per cent from that low. The report left the following comment on this.

This pullback was not a reflection of the usefulness of NFT, but rather the result of fraud and market manipulation.

Dynamics of the NFT sphere compared to Bitcoin, Etherium and S&P 500

Yuga Labs accounted for two-thirds of the sphere’s capitalisation in 2022, with CryptoPunks and Bored Ape Yacht Club collections each holding 46.7 per cent of the market. The Otherdeed collection was the loss leader among all Yuga Labs projects, falling 86.15 per cent.

Today, trading volumes with NFT in different blockchains are as follows. Etherium and Solana traditionally occupy the top two places.

Trading volumes with NFT in different blockchains


We believe that Etherium is indeed unlikely to be recognised as a security. Firstly, the launch of ETH was in exchange for bitcoins, not fiat money. Secondly, the US Securities and Exchange Commission has been unable to prove its position on the XRP token for more than two years. Well, more decentralised ethers will clearly prove to be a much more challenging target in this context.