When the SEC recently confirmed that Ethereum is not a security, not many people in the crypto world seemed to understand the full implications.
“Who cares?” asked the average crypto trader. “More regulatory claptrap!” they exclaimed.
Little did they realize how big of a deal it really is … and how beneficial it could be for the evolution of this space.
Benefit #1. As long as it’s not a security, Ethereum will most likely not fall under the SEC’s regulatory umbrella. Unlike stocks, bonds, ETFs, mutual funds and other securities, there will be no requirement to register or adhere to numerous other stringent rules.
Benefit #2. The main reason the SEC cited was that Ethereum is “too decentralized” to be a security. This means that virtually any cryptocurrency will fall into the same category, provided it does not stray too far afield from the decentralization envisioned by Satoshi.
Benefit #3. This means that the Ethereum network’s native Ether token will be considered a “utility token.” Or, as I like to call it, a “cryptocommodity.”
Benefit #4. If Ethereum isn’t a security, this helps open the door to the creation of Ethereum futures, which could infuse tremendous liquidity into the cryptocurrency market.
Benefit #5. It opens the door to possible Ether-based ETFs, which would make it easier for average investors to buy the crypto asset. More liquidity!
And as I explained here last week, liquidity is THE key to overcoming price instability, the focal point of some of the strongest criticisms leveled against cryptocurrencies.
Are these criticisms valid? Absolutely!
As a rule, decentralized applications (dApps) on crypto platforms like Ethereum simply can’t function properly unless the underlying token prices can retain some modicum of price stability.
Without that stability, how can users depend on those platforms?
Let’s say, for example, you’re an Uber driver. I pitch you on the idea of moving to some decentralized, crypto version of Uber.
In theory, you find this “dUber” concept intriguing. But in practice, you want to know if you can count on the tokens retaining their value.
When I tell you the tokens fluctuate wildly and without warning … and that the fares you’ve earned could crash by 20% or more in a flash … what’s your reaction going to be?
Unless you’re a glutton for stress, you’re going to tell me to go fly a kite.
Here’s my point:
Increased liquidity and the resulting price stability of crypto markets are absolutely essential for increased adoption and usage of crypto platforms.
And now, the SEC’s stance on Ethereum could play an important role in helping to drive up that liquidity.
All good news for crypto investors!