US SEC ends Consensys investigation into Ethereum 2.0

credit: Shutterstock
credit: Shutterstock

Blockchain software company Consensys has confirmed that the US Securities and Exchange Commission (SEC) has ended its investigation into the company. 

The SEC revealed that Consensys will not face enforcement action stemming from its initial investigation into alleged securities violations and that the financial agency has intentions to sue the company if found in breach. 

Consensys – which owns the popular Web3 wallet provider MetaMask – then counter sued the SEC last April as it believed that SEC Chair Gary Gensler was using illegal methods to gain a control over the crypto sector and turn ETH into a security following on from the merger in September 2022

ETH is the second most popular and largest cryptocurrency in the world behind Bitcoin. The cryptocurrency’s blockchain network – Ethereum – moved from proof-of-work to proof-of-stake (Ethereum 2.0) in the merger that significantly cuts emissions when mining. 

Whilst the SEC’s notice letter to Consensys does not outright mention the company, many industry experts have all but confirmed that the letter is addressed to Consensys, particularly as it pertains to Ethereum 2.0, in which Consensys’ Founder, Joe Lubin, was a Co-Founder of Ethereum. 

Alex Grieve, Head of Government Affairs at Paradigm, shared the SEC’s letter via his X account

Consensys all but confirmed the SEC’s investigation had been dropped via a blog post on its website. 

A statement read: “The Enforcement Division of the SEC responded by notifying us that it is closing its investigation into Ethereum 2.0 and will not pursue an enforcement action against Consensys.”

However, despite the investigation being dropped, Consensys has revealed that there is still cause for concern regarding the SEC’s regulatory stance on crypto and its behaviour towards it. 

The company stated that it has been fighting to protect Ethereum’s crypto ecosystem even despite ETH being cleared as not a security back in 2018, calling for greater regulatory clarity as opposed to “regulation-by-enforcement”. 

The statement continued: “While we are gratified by the SEC’s decision to stand down on Ethereum, there is more work to be done to protect crypto in the United States. 

“It is imperative that the SEC abandon its unprincipled and opaque regulation-by-enforcement campaign in favour of much-needed regulatory clarity for an industry that serves as the backbone to countless new technologies and innovations.”

Greater regulatory clarity regarding crypto compliance and guidelines has been a running theme shared across crypto companies based in the US. 

Coinbase and Ripple Labs have also echoed this sentiment in their run-ins with the SEC as of late as what is and is not a crypto security continues to be fiercely contested from both sides.