A special purpose broker dealer, or SPBD, recently disclosed
unilaterally that it would soon custody the digital asset ether,
known as ETH, as a digital asset security. This move raises unknown
legal consequences and profound confusion for industry participants
and customers.
The SPBD, licensed with the Securities and Exchange Commission,
made the announcement although ETH is commonly regarded as a
non-security by most of the crypto industry, including the
Commodity Futures Trading Commission.
Today, futures on ETH trade on multiple CFTC-registered
exchanges, and through multiple CFTC-registered futures brokerage
entities. If ETH is a security, however, these products are
effectively transformed into a different type of financial
instrument—a security future on a single
security—that's subject to joint SEC and CFTC
oversight.
