U.S. CFTC Chairman says the agency could classify Proof-of-Stake tokens as securities

At Consensus Invest, U.S. Commodity Futures Trading Commission (CFTC) chairman Heath Tarbert hinted the government agency is thinking about classifying Proof-of-Stake (PoS) tokens as securities. This view would complicate many existing and soon-to-launch blockchain networks that selected a PoS consensus mechanism over its Proof-of-Work (PoW) predecessor. Tarbert clarified his position by adding “[m]ining is, by its very nature, more decentralized as compared to a stake which reduces energy costs by giving it just one validator or a line of validators.” Tarbert’s statements put Ethereum ($ETH) directly in the spotlight, as the premier smart contract platform aims to transition to a more eco-friendly PoS design.

Why it matters:

• The SEC and CFTC previously stated they do not consider ETH as a security in its current state. The government agencies reached these suggestions after studying Bitcoin’s PoW-based network and level of decentralization for years before applying their process to Ethereum. PoS is a new (and therefore scary) model regulators still need to wrap their heads around. Judging by Tarbert’s comments, they are still a little off in their assessment. PoS elects a single validator to propose a new block akin to an individual miner winning the PoW hash race. The specifics of PoS are more complicated and still in development, so do not expect any guidance from the SEC or CFTC anytime soon.
• Tarbert also said, “America needs to lead” in crypto regulation but do so in a way that encourages innovation. Contrary to this thought is labeling all PoS tokens as securities, which will further push innovations in crypto overseas.