Ethereum News Today: Ethereum Not Classified as Security by SEC, Boosting Institutional Demand

SEC Chair Paul Atkins has clarified that Ethereum will not be categorized as a security. This declaration comes at a time when the cryptocurrency market has been experiencing significant fluctuations, with a period of devaluation in the first half of 2025 coinciding with a surge in institutional demand for Ethereum. Atkins’ statement is seen as a move to reduce the ambiguity surrounding the legal status of crypto assets, providing much-needed clarity for market participants.

Atkins emphasized that Ethereum, in its current form, does not meet the criteria for being classified as a security. The SEC considers various factors, including the operational method, level of decentralization, and user positions of assets like Ethereum, in its evaluations. This stance aligns Ethereum with Bitcoin, both of which are now informally classified as commodities by the SEC. This move is part of a broader effort by the U.S. government to integrate digital assets into the mainstream financial system and provide a clear regulatory framework for stablecoins and other digital tokens.

Following the devaluation in early 2025, major institutions increased their investments in Ethereum, sparking new dynamism in the markets. Institutional investors’ growing interest in Ethereum has been influenced by the diminishing regulatory uncertainties. Investors express that clearer regulation and stance definitions add confidence to their investments. Experts believe that major companies, particularly those with long-term investment strategies, greatly consider such official statements.

The shift from a stringent position to a more accommodating approach has laid the foundation for the ongoing upswing. Atkins’ remarks significantly pave the way for the approval of ETFs for numerous altcoins similar in structure to Ethereum. Between August and October, several ETF decisions are due. Should the general framework for altcoin ETFs crystallize, approval could be granted for over 20 crypto ETFs, signifying a rise in institutional interest and market activity.

With the increased institutional interest in digital assets, regulatory clarity and consistency have become crucial elements in the markets. The SEC’s recent announcement provides an important reference regarding Ethereum’s current status to investors. It is believed that similar statements in the future may serve as precedents for other digital assets in the sector. These developments could contribute to strengthening the position of digital assets within financial markets.

The SEC's Crypto Task Force recently held a meeting with several Ethereum-aligned organizations, including the ERC-3643 Association, Chainlink Labs, the Enterprise Ethereum Alliance, and the Linux Foundation. During this meeting, blockchain proponents and the SEC discussed how open standards like ERC-3643 and compliance frameworks like Chainlink’s Automated Compliance Engine (ACE) can bridge onchain technology with traditional regulatory requirements. ERC-3643 is a token standard designed to support compliant capital markets on the Ethereum network, backed by the ERC-3643 Association and supported by companies like Chainlink. Chainlink ACE is a smart-contract-based framework for tokenized assets such as securities or real-world assets.

Dennis O’Connell, president of the ERC-3643 Association, noted a shift in the SEC's tone and approach during the meeting. He described the task force as "very welcoming, engaged and motivated to bring the US into leadership." O’Connell highlighted the SEC's openness to industry-led standards, a notable change from previous years. He emphasized the importance of open standards in blockchain, comparing it to traditional finance, and laid out the case for why standards are fundamental to growing crypto in the US and enabling securities to come onchain.

During the meeting, industry representatives presented proposals on all key elements of a regulatory framework for tokenized securities, including identity, compliance, registry, and control. While the task force did not take a definitive stance on tokenized securities, they expressed openness to understanding how new technologies in blockchain meet concerns around identity, control, and compliance. O’Connell described the meeting as a "major step for the industry," resulting from months of behind-the-scenes work. The ERC-3643 Association and its partners plan to continue engaging with the SEC Crypto Task Force and other U.S. government agencies, with hopes that the U.S. will catch up with global regulation and eventually lead in blockchain adoption for capital markets.

Following the meeting, SEC Chair Paul Atkins made positive remarks supporting tokenization in the U.S. Atkins is considering the creation of an innovation exemption within the SEC's framework to boost tokenization. He recognized that the movement of assets to the blockchain is inevitable and that if it can be tokenized, it will be tokenized. This move is part of a broader effort by the U.S. government to normalize crypto as part of the American financial system, with the recent signing of the GENIUS Act and the forthcoming CLARITY Act. These legislative actions create the first comprehensive federal framework for stablecoins and digital assets, transforming what was once a regulatory gray zone into a green light for institutional adoption.

The GENIUS Act recognizes stablecoins as a legitimate form of digital cash, placing them in the same policy tier as traditional currency alternatives. This legitimization opens the door for more widespread usage across payment platforms, banks, and fintech apps. The act also requires stablecoins to be fully backed by U.S. dollars, short-term Treasuries, or other secure assets, ensuring stability, accountability, and user confidence. Additionally, it enforces anti-money laundering standards and mandates regular third-party audits to prevent abuse and build transparency.

The CLARITY Act, which has been passed by the House, seeks to define whether individual crypto assets are securities (under SEC oversight) or commodities (regulated by the CFTC). This clarification aims to reduce legal ambiguity for crypto businesses and investors, creating consistent rules across federal agencies. The act paves the way for compliant token launches and exchange operations by establishing clear paths for registration, oversight, and market participation, fostering innovation without sacrificing regulation.

The SEC's exploration of an Ethereum token standard is a significant development in the regulatory landscape for digital assets. By providing a clear framework for the issuance of compliant securities, the SEC aims to attract more institutional investors and foster innovation in the crypto space. This move is expected to have a profound impact on various sectors, including the mortgage industry, as lenders begin to recognize digital assets as legitimate financial instruments. Forward-thinking mortgage brokers are already offering programs designed to help crypto investors use their holdings to qualify for a mortgage without selling or pledging their coins.