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US Sen. Cynthia Lummis: Ether Is Now a Security; My Bill Might Have Stopped FTX
The Wyoming Republican says the second-largest cryptocurrency was transformed by the Ethereum Merge.
Updated Dec 7, 2022, 7:25 p.m. Published Dec 7, 2022, 5:59 p.m.
CORRECTION (Dec. 7, 2022, 18:52 UTC): Corrects headline to say that Lummis views ether as a security.
The U.S. senator behind one of the more important pieces of bipartisan crypto legislation in the works said bitcoin is the only cryptocurrency that can be considered a commodity because ether is now a security thanks to September's Ethereum Merge.
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“It’s starting to look more like bitcoin is the only thing that would qualify as a commodity,” said Sen. Cynthia Lummis (R-Wyo.), a longtime bitcoin holder and advocate. She told CoinDesk TV’s “All About Bitcoin” program on Tuesday that ether, the second-largest cryptocurrency by market capitalization, could be deemed a security.
“It’s a security because of the way [it] moved from proof-of-work to proof-of-stake,” Lummis said about the blockchain’s upgrade earlier this year. The “inability to [unstake tokens] right now makes it susceptible to being [considered] a security.”
Read more: US Sen. Gillibrand Says a Last-Ditch Stablecoin Bill May Still Emerge This Year
That could change, of course, she added. It is possible ether will become “sufficiently decentralized that it could later be deemed a commodity.”
A member of the Senate Banking Committee, Lummis, with Sen. Kirsten Gillbrand (D-N.Y.), is a sponsor of the Responsible Financial Innovation Act, which was introduced in June. If passed the bill would give the Commodity Futures Trading Commission (CFTC) the main power to set regulatory standards for crypto. Lummis told CDTV that among the goals of the bill is clearly defining what can be deemed a security or a commodity.
Had the bill already been law, Lummis said, the collapse of crypto exchange FTX might've been avoided.
“The type of rehypothecation that was going on with FTX and some of the other attributes of FTX which caused it to fail would have been prevented had the Lummis-Gillibrand bill been in effect,” Lummis said.
Lummis said the fall of FTX has only underscored a “more emphatic enthusiasm” to reintroduce the Lummis-Gillibrand legislation in the new Congress next month, and to set clear regulatory standards that will help consumers who take part in the digital asset industry.
Read more: Key US Senators Introduce Crypto Bill Outlining Sweeping Plan for Future Rules
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The White House has shut down proposals, and lawmakers are circulating the Democrats' asks in what had been a close negotiation, revealing 11th-hour pressure.
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- Democrats shared a response to Republicans outlining their continuing priorities for a crypto market structure bill, which they said was intended to "reach an agreement and proceed towards a mark-up."
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