Ethereum May Lessen Chances of ETH Being Classified as a Security: JPMorgan
Analysts at JPMorgan have noticed a continued decrease in staking platform Lido’s share of staked Ethereum (ETH). The analysts believe this should alleviate concerns about concentration in the Ethereum network.
In a research report released on Wednesday, the analysts, led by Nikolaos Panigirtzoglou, highlighted that this trend could potentially reduce the likelihood of ETH being designated as a security in the future.
Key points:
- Lido’s share of staked ETH has fallen from around one-third a year ago to approximately one-quarter currently.
- The Hinman documents, released last June, emphasized the importance of network decentralization in the SEC’s assessment of whether a digital token should be classified as a security.
- SEC officials have previously acknowledged that tokens on a sufficiently decentralized network may no longer be considered securities.
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The Hinman documents, released last June, highlight the importance of network decentralization in the SEC’s decision to classify a digital token as a security. The analysts noted that SEC officials had previously acknowledged that tokens on a sufficiently decentralized network might no longer be considered securities.
Likelihood of Ethereum classified as a security reduces
The Howey Test, originating from a U.S. Supreme Court case, serves as a method for assessing whether a transaction meets the criteria of an investment contract. If a transaction is deemed to be an investment contract, it is classified as a security.
This test has become a crucial factor in assessing the regulatory status of digital assets, including cryptocurrencies like Ethereum.
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JPMorgan’s analysis suggests that the declining concentration of staked ETH on Lido’s platform is a positive development for Ethereum’s decentralization. Increasing network decentralization reduces the likelihood of regulatory bodies like the SEC classifying ETH as a security.
Furthermore, the report highlighted the potential impact of Ethereum’s recent Dencun upgrade on the network’s competitiveness. The analysts believe that the upgrade should help Ethereum increase its dominance against alternative layer 1 blockchains and recapture the market share it had lost due to previous scalability issues.
