Tech
Ethereum and Blockchain Technologies Are Threatened by Washington Regulators
The “economic miracle” of Texas is a consolidated fact and the latest data from Texas Labor Commission confirms it: In the first quarter of this year, the state posted the largest nonfarm payroll gain in the country, posted record levels of jobs, and logged its 36th consecutive month of positive annual growth.
Texas has capitalized on this momentum and emerged as a decisive leader in so-called Web3 innovation. In other words, this is the decentralization of blockchain technologies and the token economy. Blockchain is the mechanism that records digital transactions between computers.
This is no accident: Texas lawmakers have intentionally crafted pro-crypto policies that have, in turn, attracted a robust ecosystem of developers and miners. And the state’s deregulated energy market provides access to low-cost energy supplemented by a healthy mix of renewables.
These are just a few of the reasons we moved our company, Consensys, from New York to North Texas last year. We were confident that Texas would be the optimal location for our flagship offerings, built on Ethereum, the world’s second largest blockchain, and powered by ether, the digital commodity that underpins it.
More precisely, we concluded that Texas’ unique alchemy of savvy business leaders, encouragement of innovation, and a stable regulatory environment would allow Consensys to help drive the next phase of Internet development. The hallmarks of this next phase—transparency, security, and accessibility, all controlled by the user, not a big tech company—are undeniably innovative. That’s why companies around the world are already building software applications to run on Ethereum. And why the world’s largest asset managers are working on tokenizing assets using Ethereum.
Yet all this potential is under imminent attack by unelected regulators in Washington. Without legal authority, the Securities and Exchange Commission is in the process of arbitrarily reclassifying ether from a commodity to a security so it can enforce the type of registration and other requirements that attach to securities (such as bonds, stocks and other investments ) under its jurisdiction.
But ether is clearly and logically not a stock. On multiple occasions, the SEC itself has made this point, as has its sister agency Commodity Futures Trading Commission — and our entire business model was built against the backdrop of this clear prior regulatory consensus.
THE SEC’s Regulatory Escalation It undermines the fundamental principles of the separation of powers, where Congress is responsible for legislating and assigning jurisdiction over blockchains like Ethereum. Texas knows all too well the risks inherent in federal overregulation, and the SEC’s proposed power grab in this case is unlawful, unwarranted, and arbitrary. It also directly and materially impacts Texas by dismantling a growing industry that supports high-skill Texas jobs and is at the forefront of technology, the way we store our data, and the future of our digital interactions.
More broadly, if the SEC prevails, it would spell the end of the Ethereum blockchain in the United States, rendering ether functionally inaccessible and unusable. Software developers in Texas and across the country who want to build applications that work with Ethereum would have to register as securities dealers with the SEC, a draconian step that would essentially outlaw all current software development in the United States, including Ethereum. such as daily ether transactions that are essential for on-chain transactions.
We hope that the state of Texas, no stranger to aggressively fighting federal overregulation, will join us in stopping the SEC in its tracks. We recently took an important step in filing a lawsuit against the SEC, asking a federal court to order the SEC to end its illegal campaign.
We urge Texans who value innovation and economic independence to follow suit, support this unfortunate but entirely necessary effort, and preserve the state’s hard-earned leadership position at the forefront of Web3 innovation.
Joseph Lubin is co-founder of Ethereum and founder and CEO of Consensys.
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