The long overdue discussion for which crypto is a token and which crypto is security has been reignited, and SEC has issued a severe crackdown against those that come under the noose of being classified as securities. Ether has become the subject of discussion as it is now moving towards its merge to proof of stake from proof of work consensus protocol.
Ether started its operation seven years ago, and since it minted its first block, the discussion began to spew on whether to classify Ether as a token or as a security. Because at present, Ether is not affiliated with SEC in any given shape or form because Ether thinks of itself as a token and not security, but if SEC finds the ground to be otherwise, then surely it would have to be affiliated with SEC for continuing its operations further.
Howey Test and Ether
Ether did pass the Howey test by the SEC, which is specifically put into place to make sure if a token corresponds to security or not. There are three different metrics that are discussed and pondered upon in this test, including;
- Whether the pertaining asset is an investment of money
- Whether the asset belongs to a common enterprise
- Whether there is a promise of a profit delivered by the efforts of other traders and people working with the said asset
Ether cleared for all of these elements, suggesting that it is a security and not a token, but Ether and the management continued to detest the results and forced everyone into believing that Ether is a token and not a security.
The recent move of the asset from proof of work to proof of stake consensus protocol also lists Ether as a security. Last but not least, another assumption that is thrown around is the fact that since the ETH stakes are earning revenue from validating blocks on the Ether blockchain, it means that the investors are buying the asset with the exception of a profit with the value of the token going up in the future. This thing detests Ether from being classified as a security by SEC.