While Ethereum’s recent “merge” has arguably disrupted the ongoing crypto winter enough, things got even more complex when Fidelity announced its plans to introduce crypto to its customers.
Fidelity plans to introduce crypto to its customers
More specifically, while Boston-based multinational financial services group Fidelity is flirting with the idea of opening up the bitcoin and crypto market to its 34.4 million brokerage accounts, the U.S. Securities and Exchange Commission is looking to reclassify Ethereum as a “security.”
Fidelity’s proposal, reported by The Wall Street Journal last week, is symbolic of the company’s belief that Bitcoin offers a range of long-term benefits that will see the asset eventually “take more market share from gold.”
Such an optimistic ethos from the company, which was reported to have $9.9 trillion in assets under management as of June this year, shouldn’t come as much of a surprise to connoisseurs given that not only did it start mining Bitcoin in 2015, but earlier this year, it began offering its 401,000 “Retirement Savings Account” holders the ability to invest directly in Bitcoin.
Fidelity’s industry-shocking proposal was backed by prominent web3/DeFi CEOs, including Mike Novogratz (of Galaxy Digital) and Michaël van de Poppe (of Eight Global). While taking the stage at the recent Salt conference in New York, Novogratz expressed his hope that the rumors surrounding the plans were true, while van de Poppe tweeted that he expects the plans to go ahead in November be implemented.
🔥 – BREAKING: Fidelity will launch retail #Bitcoin trading in November.
Acceptance is growing and accelerating.
— Michaël van de Poppe (@CryptoMichNL) September 8, 2022
In theory, and if executed expertly, such a bullish move by Fidelity would help accelerate the growth of both Bitcoin and the surrounding ecosystem of altcoins.
Ethereum can now be classified as a security
On the contrary, and in response to the long-awaited Ethereum “merger,” SEC Chairman Gary Gensler has expressed concern over whether the asset should now be classified as a security. This is because the asset’s transition to Proof-of-Stake (PoS) now allows holders to freeze their coins in order to earn a return — a dynamic that even more closely fits the definition of a security in the Howey test becomes.
For context, the definition of a security in the Howey test is “investment of money in a common enterprise with a reasonable expectation of gains from the efforts of others.”
According to one such definition, Gensler said in prepared remarks, “Of the nearly 10,000 tokens in the crypto market, I believe the vast majority are securities. Offerings and sales of these thousands of crypto security tokens fall under securities laws, which require these transactions to be registered or conducted under an available exemption. As such, I have asked SEC officials to work directly with entrepreneurs to register their tokens and regulate them as securities, where appropriate.”
Additionally, Gensler said that crypto platforms that offer staking services to users look “very similar” to (security) lending services, especially when certain “labels” are redefined.
Although the Ethereum to PoS transition is reportedly capable of reducing blockchain carbon emissions by 99% (according to the Ethereum Foundation), authorities seem to have opted to use this endeavor as a way to accelerate the adoption of centralized elements to not only Ethereum but also other altcoins that also offer staking services. It also goes without saying that if Ethereum becomes a recognized security, it would add additional turbulence to the asset’s already turbulent selling price.
To make the mix even more dangerous — and basically to conclude that both PoS and Proof-of-Work (PoW) adopters will face inevitable regulations — the White House Office of Science and Technology has also warned that Bitcoin could be banned due to the significant carbon footprint that its PoW mechanism creates.
Final Thoughts
Only time will tell when the next crypto bull run will begin and who will get the credit for fueling it. However, if Fidelity succeeds in introducing crypto to its 34 million customers, then November should definitely be a positive month for the crypto market. Stay bullish Blockster’s!
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