Insecurities: The Crypto Issue that Will Not Die

Last fall, the Securities and Exchange Commission filed a case against crypto giant, Ripple ($XRP), and experts are saying that it could have far-reaching implications for the future of cryptocurrency as a whole. The case argues that proof-of-stake-based tokens are securities, and previously, only Ethereum and Bitcoin clearly avoided the classification. A 2018 SEC ruling by then-director William Hinman declared proof-of-work-based crypto to be commodities, not securities, but with the advent of Eth 2.0's staking model, current SEC director, Gary Gensler, has hinted that Ether could come back under scrutiny. This would be a necessary move by the SEC in order to be consistent in their case against Ripple.

The issue at stake is whether “staking” tokens and receiving a return passes the Howey Test, the benchmark for determining whether a financial asset qualifies as a security. It remains to be seen if this issue can be laid to rest for good, or if it will continue to return from the dead to haunt the crypto market.