Coinbase released internal U.S. Securities and
Exchange Commission communications showing that New York’s top law enforcement
office urged the agency to classify Ethereum’s ether (ETH) as a security during
its legal pursuit of crypto exchange KuCoin in 2023.
The request, reportedly made by the New York Attorney
General’s office, adds another layer to the ongoing debate over digital asset
classifications and the federal agencies responsible for them.
NY Wanted SEC to File Statement Supporting ETH
Security Designation
According to Coindesk, the communication came from
Shamiso Maswoswe, head of the New York Attorney General’s Investor Protection
Bureau, who explicitly asked the SEC to weigh in on Ethereum’s legal status in
support of the state’s case.
Maswoswe noted that while the classification wouldn’t
determine the case’s outcome, since the state has jurisdiction over both
securities and commodities, it would help “get a court to hold that Ether is a
security,” which she argued would enhance investor protection.
The SEC, however, remained silent. It had previously
hinted at Ethereum’s commodity status but became more ambiguous after Ethereum
transitioned to proof-of-stake. Ultimately, the agency refrained from filing
any statement on ETH’s status in the KuCoin matter.
Coinbase released the document as part of a wider
effort to make public the communications it has obtained through Freedom of
Information Act requests. These materials include emails and internal notes
that reveal how federal regulators have handled, or avoided, key decisions on
crypto asset classifications.
Regulatory Tensions
This latest batch includes messages not only about
Ethereum, but also about Ripple and XRP. In one 2021 email, SEC staff debated
whether Ripple’s blockchain was decentralized.
The SEC was even ordered to return a portion of the
penalties it had previously collected. The friction between New
York’s request and the SEC’s muted response highlights broader jurisdictional
confusion at the federal level.
While New York’s Department of Financial Services
oversees both securities and commodities, federal regulation remains divided
between the SEC and the Commodity Futures Trading Commission (CFTC), with
overlapping and often conflicting mandates.
New York’s enforcement action against KuCoin concluded
in December 2023, with a $22 million settlement. The state alleged the exchange
failed to register to operate legally.
Since President Donald Trump returned to office, his
administration has signaled a friendlier stance toward digital assets. His
appointment of Paul Atkins as SEC chairman has already prompted the agency to
begin clarifying which parts of the crypto sector it does not consider under
its purview.
This article was written by Jared Kirui at www.financemagnates.com.
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