“SEC will define Ethereum as a security, will XRP surpass it?”

With the United States Securities and Exchange Commission (SEC) designating Ethereum (ETH) as a security, the big question is whether XRP can surpass ETH’s market cap.
The news that the U.S. Securities and Exchange Commission is reportedly considering classifying Ethereum (ETH) as a security has sparked a flurry of debate in the crypto community. Ethereum is the second largest cryptocurrency by market capitalization.
SEC classifies Ethereum as a security
Well-known media organization Fortune magazine reported yesterday that the SEC is conducting a legal action aimed at classifying Ethereum as a security. The securities regulator has asked several U.S. crypto businesses to hand over documents and financial records related to its ongoing investigation into Ethereum, Fortune magazine reported, citing people familiar with the matter.
The SEC is reportedly specifically requesting documents and financial records from U.S. businesses when dealing with the Ethereum Foundation.
The move poses a major threat to the SEC’s hopes of approving an exchange-traded fund (ETF) for Ethereum this year, as it did for Bitcoin.
Influential figures reacted
While the SEC has yet to officially comment on the matter, the report has sparked a variety of reactions from senior U.S. officials and cryptocurrency enthusiasts.
In his comments, Rep. Patrick McHenry described the SEC’s move as contradicting its previous views on Ethereum and the Commodity Futures Trading Commission’s assessment of the coin.
He reminded the SEC that it is the U.S. Congress that has the responsibility to decide its jurisdiction and budget, adding that Chairman “Gary Gensler can’t just do whatever he wants.”
Interestingly, McHenry reposted a video from a congressional hearing last year where Gensler refused to comment on whether Ethereum is a security or a commodity.
Notably, the SEC’s latest action is seen as a challenge to the U.S. Commodity Futures Trading Commission, which considers Ethereum to be a commodity, not a security.
Fox Business reporter Eleanor Terrett believes that if the SEC succeeds in classifying Ethereum as a security, it would indirectly say “get lost” to the Commodity Futures Trading Commission, which happens to be its sister agency.
The SEC’s latest move contradicts its past actions
As Rep. McHenry mentioned before, the SEC’s latest move contradicts its previous actions regarding Ethereum.
To recap, Bill Hinman, the SEC’s former head of corporate finance, declared in 2018 that Ethereum was not a security. Hyman argued that Ethereum is not a security because it is sufficiently decentralized.
Since the announcement, the SEC has not characterized Ethereum as a security in any of its actions against U.S. crypto businesses.
Possible factors affecting the SEC's new move
However, a number of things have happened over the years that may have prompted the committee to change its stance.
For example, Ethereum switched from a proof-of-work (PoW) consensus algorithm to a proof-of-stake (PoS), which was Hyman’s main argument for characterizing Ethereum as a non-security in 2018.
Additionally, the New York Attorney General’s Office characterized Ethereum as a security in its lawsuit against KuCoin. Additionally, the SEC has approved Prometheum to custody Ethereum as a security.
Can XRP Overtake Ethereum?
With the SEC planning to classify Ethereum as a security, some cryptocurrency enthusiasts have argued that a potential lawsuit against the Ethereum Foundation would be significantly damaging to the price of Ethereum, allowing XRP to overtake it.
This view is mainly raised by XRP enthusiasts, who have witnessed how the SEC’s legal action against Ripple has solidified Ethereum’s position as the second-largest cryptocurrency by market capitalization.
Remember that before Hyman’s speech, both Ethereum and XRP were in a fierce competition to determine which crypto asset would become the second largest cryptocurrency by market capitalization.
Soon after Hyman declared that Ethereum was not a security, some investors poured more money into Ethereum, believing the asset was beyond the SEC’s jurisdiction.
If the SEC officially classifies Ethereum as a security, the situation could change overnight. After years of legal battles, a federal judge declared that XRP itself is not a security. The order means XRP is currently outside the SEC’s jurisdiction unless the regulator appeals the ruling.
However, whether the SEC officially declares Ethereum a security and whether XRP can surpass Ethereum remains to be seen.
Meanwhile, Ethereum ranks second in market capitalization with a market cap of $417.6 billion. In comparison, XRP ranks sixth in market cap with a market cap of $33 billion.
Disclaimer: This content is for informational purposes only and should not be considered financial advice. The opinions expressed in this article may contain the personal opinions of the author and do not necessarily reflect the views of The Crypto Basic. Readers are encouraged to conduct thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.