US government to control every ETH transaction? Here’s what you need to know
- The SEC claims all Ethereum transactions fall under US jurisdiction in its civil complaint against a crypto influencer.
- Ethereum price has gained 4 percent in the last 24 hours despite the rising concern about the SEC’s claim.
On Monday, the US SEC (the US Securities and Exchange Commission) filed a federal lawsuit against Ian Balina (a crypto influencer) for failing to register a cryptocurrency as security before launching its initial coin offering (ICO) four years ago. While it isn’t the first time the SEC has filed civil lawsuits against individuals or firms for launching unregistered ICOs, a particular section of this lawsuit piqued the interest of eagle-eyed observers.
In the 69th paragraph of the suit, the SEC claimed that it could sue Balina because he conducted the transactions mentioned in the case on US soil. Additionally, all transactions on the Ethereum network fall under the purview of the US government.
1/ Official Statement on the baseless SEC charges regarding Ian Balina being compensated for promoting Sparkster:
The SEC Enforcement Division’s proposed charges against Mr. Balina are an unfounded effort based upon multiple misconceptions of fact and law, enumerated below.
— Ian Balina (@DiaryofaMadeMan) September 19, 2022
The financial watchdog notes in its complaint that a network of nodes on the Ethereum network validated the ETH received by Balina. But they are more concentrated in the US than in any other nation. Thus, the SEC concluded that these transactions occurred on US soil. Based on this conclusion, the SEC believes that all Ethereum transactions worldwide originated from America since most of the network’s validating nodes have a more significant presence in the US than in other nations.
However, Etherscan data shows that 45.85 percent of all Ethereum nodes are of US origin. By comparison, 19 percent of all Ethereum nodes operate from Germany, making it the country with the second highest density of nodes.
Brian Fyre, a University of Kentucky law professor, says it is convenient (from a regulatory perspective) and more straightforward for the SEC to remark that doing business on the Ethereum blockchain is the same as doing business on the US securities exchange.
Suppose the SEC can prove its claim or the current claims were valid. In that case, the regulatory body can expand its oversight functions over the decentralized Ethereum network and other crypto networks. Thus, the SEC can oversee all activities in the NFT and Defi sectors since most NFT and DeFi projects are on the Ethereum network.
Fyre remarked that the tone of this complaint has zero legal significance. Also, the court is unlikely to dwell on this statement, given the nature of this SEC’s suit against Balina. However, it doesn’t mean that this statement is true. The law professor further said it was the first time he would see the SEC explain its understanding of how the Ethereum network works and why it falls under its purview for regulation.
ETH’s price surges 4%
ETH’s price has jumped by 4 percent over the past 24 hours following a strong sell-off this past weekend. It currently trades above the $1,350 mark. Investors’ confidence seems unaffected by the SEC’s controversial claims in the Balina case. Furthermore, the ETH price surge coincides with the strong show of strength by the US market following intense sell-offs last week.
Ahead of this week’s FOMC meeting, the US market closed in the green on Monday, September 19. Analysts predict the Fed would hike rates by 75 basis points to curb inflation. However, the Fed could announce a 100 basis points increase in rates as inflation continues to soar. Recall that the SEC chair Gary Gensler recently claimed that Ethereum’s switch to a PoS could mean it is now subject to securities laws under the Howey test.
The SEC claims all Ethereum transactions fall under US jurisdiction in its civil complaint against a crypto influencer. Ethereum price has gained 4 percent in the last 24 hours despite the rising concern about the SEC’s claim. On Monday, the US SEC (the US Securities and Exchange Commission) filed a federal lawsuit against Ian Balina…
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