Ethereum Foundation, the pivotal organisation behind the Ethereum blockchain, has recently come under scrutiny from an undisclosed “state authority”.
This information was brought to light through a GitHub entry from the Foundation’s own records, dated 26 February 2024.
The platform recently underwent a substantial technical upgrade known as Dencun, marking a new era in its development. However, this period of technological advancement is now overshadowed by potential regulatory challenges, particularly from the U.S. Securities and Exchange Commission (SEC).
According to recent reports, there is a movement within the SEC to potentially classify Ethereum’s native token, $ETH, as a security. This classification would have far-reaching implications not only for Ethereum but for the entire cryptocurrency sector.
Cryptic website changes
Amid these developments, notable changes were observed on the Ethereum Foundation’s website.
Specifically, a previously existing statement disclaiming any contact with governmental bodies that requires secrecy was removed.
Alongside this, the website’s search warrant notice, typically used to indirectly indicate the absence of government subpoenas, was also deleted.
These website alterations, particularly in the context of a removed “warrant canary,” have fueled speculation about the possible reception of a confidential inquiry or subpoena by the Foundation.
A warrant canary is a method used by organisations to indirectly alert users to secret government subpoenas or data requests.
Typically, a website will post a notice stating it has not received such requests. If the notice disappears, it suggests, without direct admission, that the organisation has been served.
The SEC’s ETF deadline
Speculation abounds regarding the nature of the inquiry, with some legal experts suggesting that Swiss authorities might have initiated a document request to the Ethereum Foundation, potentially in cooperation with the SEC.
This international regulatory effort comes at a pivotal moment, as the crypto industry faces a tightening landscape of rules and oversight.
The speculation gains ground as the SEC reviews multiple applications for an Ethereum-based exchange traded fund (ETF), with industry observers growing increasingly sceptical about the likelihood of approval given the current regulatory climate.
As the deadline for approval approaches, increasing concerns are emerging due to the lack of communication from the U.S. SEC to issuers, leading to scepticism about potential approval by May.
Eric Balchunas, a senior ETF analyst at Bloomberg, has voiced his pessimism, indicating that the likelihood of an Ether ETF being approved by the deadline has diminished to 35%.
“I get all the reasons they SHOULD approve it (and we personally believe they should) but all the signs/sources that were making us bullish 2.5mo out for btc spot are not there this time”, said Balchunas recently on social media platform X.
The SEC’s intensified focus on Ethereum has also prompted reactions from prominent figures in the crypto sector.
Brian Quintenz, from the venture capital giant Andreessen Horowitz (A16z), has publicly criticised the SEC’s approach, particularly in light of past decisions that seemed to acknowledge $ETH’s status as a non-security.
Quintenz’s arguments hinge on the SEC’s previous allowance of $ETH Futures ETFs to trade, suggesting a recognition of ETH’s commodity status.
Similarly, Coinbase’s Chief Legal Officer, Paul Grewal, has taken to social media to assert Ethereum’s position as a commodity, not a security, drawing on historical statements and legal standards.
