Ethereum Foundation Gets “Voluntary Enquiry” From “State Authority”

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  • The Ethereum Foundation has received an inquiry over elements of the cryptocurrency from an unnamed “state authority”
  • Companies linked to Ethereum have also received SEC subpoenas amid a probable investigation into its potential security classification
  • The investigation will raise concerns among Ethereum ETF applicants

The Ethereum Foundation is under scrutiny from an unnamed state authority amid a probable investigation from the Securities and Exchange Commission (SEC). The foundation yesterday revealed that it has received what it termed a “voluntary inquiry from a state authority” while companies connected to Ethereum have received subpoenas relating to an SEC investigation into its potential classification as a security. The news may concern the entities that have filed for Ethereum ETFs, although the investigations shouldn’t come as a surprise to those who have been monitoring US authorities’ comments on Ethereum since it moved to a proof-of-stake consensus mechanism.

Ethereum Foundation Removes Key Footer

The Ethereum Foundation revealed the development through a GitHub commit yesterday which removed a footer in a statement posted on its website, a statement which said that it had “never been contacted by any agency anywhere in the world in a way which requires that contact not to be disclosed.” The commit stated that the footer had been removed because the Foundation had “received a voluntary inquiry from a state authority that included a requirement for confidentiality.”

The foundation has yet to comment on the nature of the inquiry, but Fortune added some background by claiming that other entities connected to the Ethereum ecosystem had received subpoenas related to the potential classification of the cryptocurrency as a security.

Details of the inquiries remain undisclosed, but Fortune cited sources familiar with the matter as indicating that the SEC’s investigation into Ethereum extends to US companies, which have received subpoenas related to their interactions with the Ethereum Foundation.

Proof-of-Stake Switch Could be Ethereum’s Undoing

The focus of these subpoenas appears to be on the Foundation’s governance transition to a proof-of-stake model, initiated in September 2022, which marked a departure from the proof-of-work consensus mechanism utilized by Bitcoin. SEC chair Gary Gensler stated at the time of the transition that it could lead to Ethereum being classed as a security, and it seems he and his office are taking steps to formalize this classification.

The SEC’s scrutiny of Ethereum comes at a critical juncture, with implications for the broader crypto industry and the regulatory framework governing digital assets. As financial institutions like Fidelity and BlackRock seek approval for Ethereum ETFs, the regulatory uncertainty surrounding Ethereum raises questions about the feasibility of such products and the broader implications for market stability and investor confidence.