Ethereum co-founder says ether not a security, compares it to oil after regulator claims
Joseph Lubin, co-founder of Ethereum and CEO of blockchain firm ConsenSys.
Riccardo Savi | Getty Images for Concordia Summit
The co-founder of Ethereum, Joseph Lubin, hit out at regulators likening the ether cryptocurrency to a security, saying it was more akin to a commodity like oil.
In an interview with CNBC’s Arjun Kharpal at Paris Blockchain Week Thursday, Lubin said he was “very confident” ether was not a security.
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If it were treated as such, ether would need to be registered with regulators and subjected to much stricter requirements around pre-clearance and reporting.
“Anyone can say anything, it doesn’t make it true,” Lubin told CNBC.
The concerns that ether may be deemed a security stem from a lawsuit filed by the New York Attorney General Letitia James against Seychelles-based cryptocurrency exchange Kucoin, which alleged the firm failed to register as a securities and commodities broker-dealer and falsely represented itself as an exchange.
In the lawsuit, the NYAG’s office listed ether among several tokens listed on Kucoin that the regulator viewed as securities, stating it was a “speculative asset” that relies on the efforts of third-party developers to provide holders with a profit.
“It’s unfortunate that that sort of side swipe was made, but I don’t think it’s all that relevant,” James said.
Ether is different from bitcoin in that it fuels an ecosystem of applications where users can make trades, loans, or buy nonfungible tokens.
It is the second-largest token globally, with a market capitalization of $212.8 billion.
Ether was trading 2% lower Thursday in the last 24 hours, according to data from CoinGecko.
Previously, the U.S. Securities and Exchange Commission also suggested ether may be classed as a security due to its switch to a new verification system known as “proof of stake.”
In a proof of stake model, a blockchain’s validators lock up some of their tokens in return for ensuring the security of the network. By doing so, they can gain interest-like yields.
Some regulators believe that model means it fulfils the Howey Test, which states that an investment contract exists if there is an investment of money in a common enterprise and the expectation of profits derived from the efforts of others.
In September, SEC Chair Gary Gensler told reporters that any cryptocurrency or intermediary that allows holders to “stake” their tokens may pass the Howey Test.
Lubin said ether should instead be viewed as a commodity. “People buy barrels of oil with the expectation of profit,” he said.
When asked again whether he thinks ether might be a security, Lubin said: “I don’t think there’s any point to speculate on something that is extremely unlikely.”
The SEC has ramped up its enforcement of the crypto industry lately, clamping down on companies and projects it alleges have offered users unregistered securities.
On Tuesday, the SEC issued crypto exchange Coinbase a notice warning the company that it had identified potential violations of U.S. securities law.
Lubin said crypto industry participants are “generally frustrated” with actions from the regulators.
“I think some of us believe that many of the actions are right and reasonable,” he said, adding “more clarity” was needed. “We’ve seen focus on things that should see real scrutiny and we’ve seen misunderstandings.”
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Technology
Trump advisor Navarro rips Apple’s Tim Cook for not moving production out of China fast enough
White House trade advisor Peter Navarro chastised Apple CEO Tim Cook on Monday over the company’s response to pressure from the Trump administration to make more of its products outside of China.
“Going back to the first Trump term, Tim Cook has continually asked for more time in order to move his factories out of China,” Navarro said in an interview on CNBC’s “Squawk on the Street.” “I mean it’s the longest-running soap opera in Silicon Valley.”
CNBC has reached out to Apple for comment on Navarro’s criticism.
President Donald Trump has in recent months ramped up demands for Apple to move production of its iconic iPhone to the U.S. from overseas. Apple’s flagship phone is produced primarily in China, but the company has increasingly boosted production in India, partly to avoid the higher cost of Trump’s tariffs.
Trump in May warned Apple would have to pay a tariff of 25% or more for iPhones made outside the U.S. In separate remarks, Trump said he told Cook, “I don’t want you building in India.”
Analysts and supply chain experts have argued it would be impossible for Apple to completely move iPhone production to the U.S. By some estimates, a U.S.-made iPhone could cost as much as $3,500.
Navarro said Cook isn’t shifting production out of China quickly enough.
“With all these new advanced manufacturing techniques and the way things are moving with AI and things like that, it’s inconceivable to me that Tim Cook could not produce his iPhones elsewhere around the world and in this country,” Navarro said.
Apple currently makes very few products in the U.S. During Trump’s first term, Apple extended its commitment to assemble the $3,000 Mac Pro in Texas.
In February, Apple said it would spend $500 billion within the U.S., including on assembling some AI servers.
WATCH: Apple’s $500 billion investment: For AI servers not manufacturing iPhones
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