Ethereum (ETH) Might Become Security: What If It Really Happens?

Another big discussion topic arises as the SEC is thinking about calling Ethereum a security. This is similar to what they have been trying to do with another cryptocurrency you already know, XRP.

When a crypto asset is tagged as a security, it means it might be subject to strict trading regulations. For retail traders, this could mean more paperwork and limitations on buying and selling Ethereum in the U.S. Companies dealing with Ethereum might have to follow rules that apply to stocks and bonds, which could make things complex.

However, Ethereum’s nature as a decentralized blockchain makes enforcing these potential regulations a tough task, especially globally. Even if the SEC puts restrictions in place, people outside the U.S. could still trade Ethereum freely. This includes U.S. citizens, who might find ways to continue trading despite the hurdles.ETHUSD Chart by TradingView

Technically, being considered a security affects how Ethereum gets listed on exchanges and what kind of investors can get involved. This can lead to some exchanges delisting ETH or moving it to a platform that handles securities. This kind of news can cause uncertainty and lead to price drops, as investors might get nervous and sell their holdings.

Already, Ethereum’s price has shown some reaction to these developments, with a noticeable surge in volatility, which is not surprising considering the most recent severe market correction. Ethereum’s case is particularly delicate given the recent approval of Bitcoin ETFs. Many investors expected Ethereum to be the next asset in line for receiving an ETF.

If Ethereum is marked a security, it would not mean the end for ETH trading. It could, however, introduce far more complexity and barriers that could affect its growth negatively. Anyway, it is too early to call it an end, as Ethereum has all the potential in the world to recover and beat the SEC in a potential court case.