With the US controlling 45% of the total Ethereum nodes, the SEC is claiming complete jurisdictional rights over the entire Ethereum network.
While we all know that the Ethereum blockchain network is completely decentralized, the US SEC has made a controversial statement recently. On Monday, September 19, the SEC filed a federal lawsuit against crypto influencer Ian Balina.
The lawsuit accused Balina of failing to register crypto before its ICO in 2018. However, crypto enthusiasts who read the filing in detail found a bold claim made by the securities regulator. Interestingly, the SEC claimed that they have the right to sue Balina because the entire Ethereum network falls under the purview of the US government. In its filing, the SEC noted:
ETH sent to Balina was “validated by a network of nodes on the Ethereum blockchain, which are clustered more densely in the United States than in any other country. As a result, those transactions took place in the United States.”
According to the data from Etherscan, nearly 45.8% of Ethereum nodes operate from the United States. Germany is at the second spot in terms of the density of the nodes at 19%. The SEC seems to be suggesting that since a huge of Ethereum nodes operate from the United States, they have jurisdictional rights over Ethereum transactions taking place globally. Speaking to Decrypt, University of Kentucky law professor Brian Fyre told:
“Saying that enables [the SEC] to characterize doing business on the Ethereum blockchain, as doing business on a US securities exchange. Which, from their regulatory perspective, is convenient. It makes things so much simpler.”
If the SEC starts classifying the SEC activity to the US securities exchange, it means that the regulatory body claims jurisdictional rights over the entire Ethereum network. This would mean a major escalation in SEC’s oversight.
Here’s What Crypto Market Experts Think
Some market experts believe that the comments by the SEC over Ethereum jurisdiction have very little legal weight. Aaron Lane, an Australian lawyer and senior research fellow at the RMIT Blockchain Innovation Hub, said that the distribution of Ethereum nodes remains irrelevant in this case.
“The fact that we’ve got a US-based plaintiff, a US-based defendant and transactions flowing from the US is what is most relevant here. It doesn’t matter whether the payment was done on Ethereum, Mastercard or any payment network for that matter,” he added.
Although the news made an uproar in the crypto space, it didn’t much affect the ETH price. ETH is still trading 4% up at a price of $1,360.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
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