The price of Ether post-Merge is struggling partly because of SEC chair Gary Gensler’s recent comments on staked assets being regarded as securities. He had said that native assets of proof-of-stake (PoS) blockchains, which allow holders to passively earn returns through staking, could pass the Howey test.
It should be noted that the Howey test establishes whether an asset qualifies as an investment contract, and therefore subject to federal security laws. An asset, under the test, is considered an investment contract if investors pledge their money to fund an enterprise with the intention of making profits from its efforts. Gensler said the proof-of-stake (PoS) cryptocurrencies could pass this test.
Through the PoS mechanism, the Ethereum network will utilize stakers for block validation. The Securities and Exchange Commission thinks this might make Ether (ETH) secure. Gensler said this modus operandi fits a business model common with assets under securities laws.
If Ether is indeed labeled an investment contract, thus subject to securities laws. Gensler didn’t highlight Ethereum directly or any other cryptocurrency as a matter of fact when commenting about PoS coins. It should be noted that the current chair’s predecessors under the previous administration had signaled that the SEC did not believe that Ethereum was secure.
At the time of writing this article, Ether was trading at $1,426. It lost 2.39% of its value in the last 24 hours and is down 17.34% in the last seven days. It has been on a freefall ever since Merge. The slump in ETH’s price has raised concerns about a centralization issue with Ethereum’s PoS model