Despite Ethereum’s recent ‘Merge’ arguably causing enough disruption to the ongoing crypto winter, matters have become even more complex as Fidelity announced its plans to introduce crypto to its customers.
Fidelity Plans To Introduce Crypto To Its Customers
More precisely, as Boston-based multinational financial services corporation Fidelity flirts with the idea of opening the bitcoin and crypto market to its 34.4 million brokerage accounts, the U.S. Securities and Exchange Commission (SEC) is wanting to reclassify Ethereum as a ‘security’.
Fidelity’s proposal, which was reported by the Wall Street Journal last week, is symbolic of the company’s belief that bitcoin hosts a range of long-term advantages that will eventually see the asset “take more market share from gold”.
Such bullish ethos from the company, which was reported manage $9.9 trillion worth of assets under administration in June this year, shouldn’t come as much surprise to those in-the-know, as not only did it begin mining bitcoin back in 2015, but earlier this year it began offering its 401,000 ‘Retirement Savings Account’ holders the ability to invest directly in bitcoin.
Fidelity’s industry-shaking proposal has been met with support from prominent web3/DeFi CEOs, including Mike Novogratz (of Galaxy Digital) and Michaël van de Poppe (of Eight Global). Whilst on stage at the recent Salt conference in New York, Novogratz issued his hope that the rumors surrounding the plans were true, whilst van de Poppe posted on Twitter that he expects the plans to come into action in November.
In theory, and if executed proficiently, such bullish move from Fidelity would help accelerate the growth of both bitcoin and its surrounding ecosystem of altcoins.
Ethereum May Now Be Classified As A Security
On the contrary, and in response to Ethereum’s long-awaited ‘Merge,’ the SEC’s Chairman Gary Gensler has issued his concern surrounding whether the asset should now be classified as a security. This is because the asset’s transition into proof-of-stake (PoS) now allows holders to lock up their coins to receive a return- a dynamic which caters even more so to the Howey Test’s definition of a security.
For context, the Howey Test’s definition of a security is an: “investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others”.
As per such definition, Gensler said in prepared remarks: “Of the nearly 10,000 tokens in the crypto market, I believe the vast majority are securities. Offers and sales of these thousands of crypto security tokens are covered by the securities laws, which require that these transactions be registered or made pursuant to an available exemption. Thus, I’ve asked the SEC staff to work directly with entrepreneurs to get their tokens registered and regulated, where appropriate, as securities”.
In addition, Gensler said crypto platforms which offer staking services to users look “very similar” to (security) lending services, especially once particular ‘labels’ are redefined.
So, it seems despite Ethereum’s transition to PoS reportedly having the ability to reduce the blockchain’s carbon emissions by 99%, (according to the Ethereum Foundation), authorities have opted to use the endeavor as means for accelerating the introduction of centralized elements to not only Ethereum, but other altcoins which also offer staking services. It also goes without saying that Ethereum becoming a recognized security would add an extra level of turmoil to the already turbulent sell-off price of the asset.
To add even more jeopardy into the mix — and to basically infer that both PoS and proof-of-work (PoW) adoptees will face unavoidable regulations — the White House Office of Science and Technology also has also warned that bitcoin could be banned due to the substantial carbon footprint its PoW mechanism emits.
Only time will tell what when the next crypto bull run take off and who will take credit for fueling it. That said, if Fidelity does succeed with introducing crypto to its 34 million customers, then November should definitely be a positive month for the crypto market. Stay bullish Blockster’s!