The Ethereum Foundation, the non- profit organization dedicated to the development of the Ethereum ecosystem, is being investigated by an unnamed “state authority.” This information was first revealed on GitHub on February 26, which stated that the foundation received subpoenas related to an investigation.
Meanwhile, rumors have that the SEC is launching a campaign to classify Ethereum as a security.
According to a report from Fortune, the “state authority” could be the US Securities and Exchange Commission (SEC). The publication said that the SEC is launching a regulatory campaign to classify Ethereum, the second-largest cryptocurrency, as a security. At the time of writing, there’s no official confirmation from the Ethereum Foundation or the SEC.
Fortune added that the investigation was launched in September 2022 when Ethereum started transitioning from Proof-of-Work to Proof-of-Stake. Stalking services have long been the SEC’s biggest concern and the agency repeatedly mentions it as a foundation to classify Ether as a security.
The US Just Won’t Quit
The news broke out amid the ongoing process of regulatory review on several spot Ethereum exchange-traded fund (ETF) filings. This investigation could delay or prevent the approval of these products. Also on the same day, the SEC decided to postpone VanEck’s spot Ethereum ETF filing. The SEC’s decision on whether to approve an Ethereum ETF is expected on May 23.
Commenting on the matter, Fox News journalist Eleanor Terret said that if Fortune’s report is correct, it explains why the SEC is being silent on the spot Ethereum ETF topic, unlike several statements made previously on the spot Bitcoin ETF filings.
However, Eleanor noted that the SEC deemed ETH not a security in 2018, meaning the regulator might revisit the Initial Coin Offering (ICO) that funded Ethereum’s launch to support its investigation.
So far, Bitcoin is the only cryptocurrency that gets the regulatory nod – the SEC said in a statement following the spot Bitcoin ETF approval that Bitcoin is a non-security commodity. On the other hand, The SEC’s current stance on Ethereum’s legal status remains unclear. SEC Chair Gary Gensler previously stressed that most cryptocurrencies fall under security based on the Howey test.
Ethereum Bounces Around With Market
Data from CoinGecko shows that Ethereum (ETH) has entered a correction as its price fell below $4,000 in the last week. At press time, ETH is trading at around $3,300, down 17% in the last 7 days. Ethereum braces more volatility upon the recent negative news, despite the network’s successful upgrade last week.
Last week, Ethereum successfully completed its Dencun upgrade, officially activating EIP-4844 on Ethereum mainnet. Dencun is the next major milestone of Ethereum after the Shapella upgrade.
The upgrade implements five Ethereum Improvement Proposals to increase storage space for data and reduce fees. The focus of this upgrade is EIP-4844, also known as proto-danksharding. This feature will expand the blockchain by creating more space for data “blobs”, thereby expected to reduce gas fees for layer 2 rollups.
Following the Dencun deployment, prominent Layer-2 chains began adopting EIP-4844 and saw a significant decrease in average transaction costs.
Data from Layer-2 protocols shows that transaction fees of Optimism, Base, Zora, as well as other ecosystems such as zkSync and Starknet, have all recorded significant decreases.
For example, gas fees on Base dropped from about $0.50 on March 13 to about $0.0012. Meanwhile, the average fee on Base stands at $0.06. Transaction fees on Optimism have also been significantly improved
On Starknet, users also confirmed that transaction fees have decreased. Argent, one of the largest wallet providers on the network, noted that the fee for a token sale on Starknet is only $0.04, much lower than before Dencun was implemented.
The most popular Layer-2, Arbitrum One, recently launched its ArbOS Atlas upgrade to support Ethereum’s Dencun with the implementation of blobs.
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