Senator Lummis Now Believes Ether is a Security
Yet another US politician at the center of crypto industry regulation has changed stances on Ether’s legal classification.
Senator Cynthia Lummis (R-WY) revealed Wednesday that she now views the second largest cryptocurrency as a security – not a commodity.
Bitcoin is the Only Crypto Commodity: Lummis
Lummis expressed her changed view on the asset with CoinDesk on Tuesday while discussing the measures that may have prevented FTX’s collapse last month. She suggested that her digital asset regulation bill proposed in June, which seeks to provide clarity on how to classify crypto assets, could have done so.
“Right now, the way things sit, it’s starting to look more like Bitcoin is the only thing that would qualify as a commodity,” she said.
The senator’s statement is a departure from her claims in June, which would have made room for Ether as a commodity, alongside Bitcoin. However, with Ethereum’s switch to a proof of stake consensus mechanism after September’s Merge, she believes it may not be sufficiently decentralized to meet the bar.
“The inability to de-stake right now make it susceptible to being a security,” she explained.
According to the Howey Test, a security is an asset issued by a centralized entity to raise money, whereby investors expect to profit from holding that asset based on the entity’s efforts. While Bitcoin is largely agreed not to pass the test, crypto proponents and regulators have long debated whether other digital assets are securities, commodities, or an entirely new asset class.
SEC chairman Gary Gensler has stated multiple times that he views the vast majority of crypto assets, including stablecoins, as securities. Thus far, he has only been specific when addressing Bitcoin, which he sees as a commodity.
However, like Lummis, Gensler did suggest that the Merge may have given Ether more security-like properties. This is due to the staking lockup period provided by the network, in exchange for an expectation of rewards for that stake.
Recent statements from Rostin Benham of the CFTC indicate that he may have also moved to adopt Gensler’s position, despite historically viewing Ether as a commodity.
Lummis on Sam Bankman-Fried
Lummis finds it predictable that Sam Bankman-Fried – the disgraced CEO of FTX – would hesitate to attend a congressional hearing on his exchange’s collapse, after receiving an invitation from House Financial Service Committee chair Maxine Waters last week.
“I think that there is a potential liability under civil and criminal statutes for things that were done at FTX,” she said. “Not having a board of directors, having 135 companies, not having a clear financial opening for people to look at… it just smacks of fraud.”
Nevertheless, the senator believes Bankman-Fried should focus on moving through the bankruptcy process, rather than testifying to congress to repair his public image.