The New York Attorney General Letitia James has declared Ethereum‘s native ETH token and other cryptocurrencies as “securities and commodities” in a statement related to her lawsuit against the cryptocurrency exchange KuCoin. She further stated that KuCoin illegally facilitated the trading of digital assets to people in New York, a state where the platform is not registered according to the law.
The Office of the Attorney General (OAG) was able to purchase and sell cryptocurrencies on KuCoin from New York, even though the company is not registered in that state. Furthermore, AG James mentioned that the platform enables traders, including those residing in New York State, to buy and sell popular virtual currencies such as ETH, LUNA, and TerraUSD (UST), which are securities and commodities.
Implications of Ethereum being classified as a security in the US
The statement by the US Attorney General is an unexpected move, as it marks the first time a regulatory official has referred to Ethereum (ETH) as potentially being a security under US law. If this classification was to be confirmed, it could have far-reaching implications for the cryptocurrency industry. This scenario has been of much concern within the Ethereum community, though the exact effects it would have on Ethereum and the price of ETH are yet to be seen.
The Ethereum Foundation, which largely supports the development of the Ethereum network, is registered in Switzerland rather than in the United States. Additionally, much of the trading and exchanges for ETH and other altcoins occur on offshore platforms not subjected to US regulation.
Rostin Behnam, Chairman of the Commodity Futures Trading Commission (CFTC), has previously stated that Bitcoin (BTC) is the only digital asset that can be recognized as a commodity for regulatory purposes.
Gary Gensler, Chair of the Securities and Exchange Commission (SEC), has referred to bitcoin as a commodity in the past but has not provided any insight into his views on other cryptocurrencies.
Attorney General James asserted that the action against KuCoin is part of a larger effort to “curb cryptocurrency companies that are violating our laws and exposing investors to potential risks.” She remarked, “My office is taking action one at a time against these cryptocurrency companies, ensuring they adhere to our regulations and protect those investing in them.”
“All New Yorkers and all companies operating in New York must follow our state’s laws and regulations. Unfortunately, KuCoin operated in New York without registration, so we are taking strong action to hold them accountable and protect investors.”
Attorney General James
The Attorney General of New York is now seeking a court order to prohibit KuCoin from labeling itself an “exchange” and prevent it from providing services to users located in New York using geo-blocking based on their IP addresses and GPS location.
