Ethereum Foundation subpoenae threatens ETH ETF approval odds

Ethereum Foundation has been subpoenaed, with records tracing back to network’s PoW to PoS transition in September 2022.
SEC is reportedly pursuing an “energetic legal campaign” to classify Ethereum as a security.
ETH ETF approval, expected in May, could suffer by association.

As Ethereum (ETH) price joins cryptocurrency markets in reacting to Wednesday’s Federal Open Market Committee (FOMC) meeting, the network is digesting new discoveries that the Ethereum Foundation has been subpoenaed for the first time in its history.

Also Read: Solana leapfrogs Ethereum on DEX volume

Ethereum Foundation subpoenaed

Discoveries from a GitHub “commit” dated February 26, 2024, on the Ethereum Foundation’s repository shows that the Swiss-based entity received a voluntary enquiry “from a state authority” alongside a confidentiality requirement, or in clear terms, a gag order. Typically, one of three agencies have historically been associated with gag orders, and they are The US Securities & Exchange Commission (SEC), The Federal Bureau of Investigations (FBI) and the Internal Revenue Service (IRS).

The Foundation has removed the Warrant Canary from its website, indicating in a Github repository that a state authority has subpoenaed them. However, the Ethereum Foundation is complying and handing over private data.

Based on the findings, the Foundation is the subject of an investigation by the unnamed authority state agency, with details of the probe still under wraps.

Meanwhile, it comes amid anticipation for a possible ETH exchange-traded fund (ETF), due on May 23, after multiple delays already. Reports allude to the subpoena being an indirect attack on the possibility of a possible approval, with Fortune reporting that the SEC is still looking to label ETH as a security.

Unlike the case with the spot BTC ETF counterpart, the SEC has not demonstrated clear contact with prospective fund issuers. Market watchers say this is a sign of an imminent rejection, likely associated with the ongoing probe.

Speaking to a news site, a legal expert said the unnamed state agency could be in partnership with the SEC, adding that there could be multiple other agencies also under scrutiny. Another lawyer has echoed the sentiment, saying this could be an attempt by the SEC to maintain its ambiguity for just a bit longer or that it is finally “going nuclear” on ETH.

I'll have some thoughts on this. I do think this relates to the ETF, along with CB/Binance enforcement actions. The SEC has been in an untenable position for some time with its position on ETH. This is imo either (i) an attempt to maintain its ambiguity for just a bit longer or… https://t.co/6vCWOFpkQN
— Scott Johnsson (@SGJohnsson) March 20, 2024

The Ethereum Foundation did not immediately respond to our request for comment.

Meanwhile, seeing as the Ethereum price has underperformed despite the Dencun upgrade, speculation has it that insiders could be privy to information.

At the time of writing, Ethereum price is $3,470, still dropping on higher time frames, but lower times suggest a recovery after the Federal Open Market Committee (FOMC) inclined toward three rate cuts this year.

ETH/USDT 1-day chart

Ethereum FAQs

What is Ethereum?

Ethereum is a decentralized open-source blockchain with smart contracts functionality. Serving as the basal network for the Ether (ETH) cryptocurrency, it is the second largest crypto and largest altcoin by market capitalization. The Ethereum network is tailored for scalability, programmability, security, and decentralization, attributes that make it popular among developers.

What blockchain technology does Ethereum use?

Ethereum uses decentralized blockchain technology, where developers can build and deploy applications that are independent of the central authority. To make this easier, the network has a programming language in place, which helps users create self-executing smart contracts. A smart contract is basically a code that can be verified and allows inter-user transactions.

What is staking?

Staking is a process where investors grow their portfolios by locking their assets for a specified duration instead of selling them. It is used by most blockchains, especially the ones that employ Proof-of-Stake (PoS) mechanism, with users earning rewards as an incentive for committing their tokens. For most long-term cryptocurrency holders, staking is a strategy to make passive income from your assets, putting them to work in exchange for reward generation.

Why did Ethereum shift from Proof-of-Work to Proof-of-Stake?

Ethereum transitioned from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) mechanism in an event christened “The Merge.” The transformation came as the network wanted to achieve more security, cut down on energy consumption by 99.95%, and execute new scaling solutions with a possible threshold of 100,000 transactions per second. With PoS, there are less entry barriers for miners considering the reduced energy demands.

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