The federal court dropped the lawsuit because its core argument was already resolved, though Consensys repeated assertions that the U.S. securities regulator is abusing its authority.
The U.S. Securities and Exchange Commission had – for a time – added Consensys to a list of crypto investigation targets, prompting the technology incubator company to sue it for overreach in federal court. Because the regulator then shut down that Ethereum probe earlier this year, a Texas judge has decided the lack of immediate danger means the lawsuit is unwarranted.
Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas noted in a Thursday filing that “because withholding consideration subjects plaintiff to scant, if any, hardship, the claim lacks a ripe case or controversy.” In other words, since there’s no clear future threat to Consensys, there’s no point in this judge weighing in.
“In a significant win for the industry, the SEC dropped its ‘Ethereum 2.0’ investigation after our litigation was filed, and the Texas court today recognized that the SEC already gave Consensys the relief it sought on that critical issue for the Ethereum ecosystem,” the company said in a post on X.
Consensys argued that its lawsuit “laid bare the overzealous investigation of Ethereum, and policymakers and the public at large voiced deep concern over the SEC’s investigation of blockchain software development.”
The SEC didn’t immediately respond to a request for comment on the case being dismissed.
When Consensys sued the agency in April, it asked the court to declare that Ethereum’s ether (ETH) is not a security and that any investigation of ConsenSys based on the idea that the token is a security would trample on the company’s rights. It also contended that MetaMask is not a broker under federal law and that its staking service doesn’t violate securities law.
After backing down in the ETH investigation, the SEC did follow up with charges against Consensys later in June, alleging that the company’s MetaMask service was acting as an unregistered securities broker.
While the SEC hasn’t made a public statement about ETH’s status, last week, the regulator settled charges with eToro which let the trading platform continue listing ETH in the U.S.
In his blog post, Buterin says the network needs to address these components simultaneously; otherwise the blockchain could fail.
Ethereum co-founder Vitalik Buterin laid out a new roadmap for the network to follow over the next few years, arguing that the world’s second-biggest blockchain should push forward on key goals of layer 2 scaling, wallet security and privacy in a coordinated fashion.
In a blog post titled “the Three Transitions,” Buterin wrote that the technical transitions need to be addressed simultaneously, to maintain key components of the protocol while providing a “global and permissionless experience to average users.”
“These three transitions are crucial,” Buterin wrote in the blog post. “But they are also challenging because of the intense coordination involved to properly resolve them.”
Layer 2 scaling
The first component, layer 2 scaling, is crucial as Buterin argues that if Ethereum fails on this front, “every product aiming for the mass market inevitably forgets about the chain and adopts centralized workarounds for everything.”
Ethereum has seen massive growth over the past few months in terms of the number of layer 2 networks, with ZK rollups released by Polygon and Matter Labs.
Ethereum is set later this year to undergo a major upgrade known as Dencun thatwill include a technical feature known as proto-danksharding, aiming to help make rollups cheaper.
Crypto wallet security
The second component, wallet security, which involves moving all users wallets over to smart contract wallets, Buterin argues is needed so that users are comfortable with storing their cryptocurrency payments and data on-chain, otherwise they move over to centralized entities.
Privacy
Buterin also suggests that the final component, privacy, is crucial otherwise “Ethereum fails,” as users will have all their on-chain activity visible to the public.
“It’s not just features of the protocol that need to improve; in some cases, the way that we interact with Ethereum needs to change pretty fundamentally, requiring deep changes from applications and wallets,” Buterin writes.
The exchanges, targeted by the SEC for violating federal securities laws, have suffered a significant wave of user withdrawals but managed to process transactions in an orderly fashion so far.
U.S. Securities and Exchange Commission (SEC) lawsuits against Binance, Binance.US and Coinbase have spurred the exodus of some $4 billion of deposits from the crypto exchange giants, according to blockchain data.
The three exchanges suffered a combined net outflow of $3.1 billion via the Ethereum network and $864 million in bitcoin (BTC) between Monday and Thursday, data from blockchain analytics firms Nansen and Glassnode shows. Net outflow means withdrawals outpaced incoming deposits.
The exchanges processed withdrawals in an orderly fashion through the week.
The SEC first filed a lawsuit Monday against Binance, its U.S.-based entity Binance.US and chief executive Changpeng “CZ” Zhao, for a slew of federal securities law violations. Then, the agency sued Coinbase on Tuesday for offering unregistered securities to the public.
The actions unsettled the cryptocurrency market, with tokens the SEC characterized as securities in the suits, including Binance’s BNB, Cardano’s ADA and Polygon’s MATIC tumbling the most during the week. The SEC is seeking to freeze assets on Binance.US, which caused BTC and ether (ETH) to trade at a significant premium for a period compared to other platforms, as traders and market makers retreat from the platform.
Crypto traders, spooked by the regulatory clampdown, took their funds en masse from the exchanges targeted by the SEC.
Binance, the world’s largest crypto exchange by trading volume, experienced a $2 billion net outflow on the Ethereum blockchain over the course of four days, Nansen data shows. The metric includes ETH and all Ethereum-based tokens.
BTC withdrawals also outpaced deposits by some $838 million (31,868 BTC) during this period, according to Glassnode data.
Wednesday’s net outflow of 13,953 BTC was the largest daily drawdown since last December, when a botched reserve report shook investors confidence – already shaky after the collapse of Sam Bankman-Fried’s rival exchange FTX – in the exchange.
While this week’s outflows were significant, they represent only about 5% of all assets on the exchange, according to Binance’s crypto wallets.
Coinbase endured $1 billion of net outflows via Ethereum from Monday to Thursday, according to Nansen. BTC outflows totaled $25 million, per Glassnode.
Binance.US net outflows totaled $75 million on Ethereum, Nansen data shows. Glassnode does not track the platform.
The U.S.-based exchange said on Friday that users should withdraw USD as soon as possible following the SEC’s “extremely aggressive and intimidating tactics” against the company. The platform has suspended U.S. dollar deposits and will delist USD trading pairs shortly, while it temporarily transitions to a crypto-only exchange.
This article was written and edited by CoinDesk journalists with the sole purpose of informing the reader with accurate information. If you click on a link from Glassnode, CoinDesk may earn a commission. For more, see our Ethics Policy.
A standardized ETH staking benchmark could unleash a new generation of financial products that appeal to TradFi.
In any industry, standardization drives scale. Ethereum’s transition last year to proof of stake (PoS) unlocked an exciting opportunity to create a benchmark that tracks staking yields, which could serve as the basis for financial products that track this rate.
Under PoS, Ethereum block validators, also known as stakers, lock up a portion of their ether (ETH) as collateral to participate in the network’s consensus mechanism. In return for their participation, stakers earn rewards in the form of new protocol emissions and transaction fees.
To fully achieve the promise of this innovation, a standardized benchmark can be produced by capturing and publishing the daily, annualized mean of on-chain rewards across all validators. It would be difficult to manipulate because of the inherent transparency, replicability and immutability of the blockchain – in contrast, say, to the infamously manipulated LIBOR benchmark that powered traditional finance (TradFi) credit markets for years.
Based on a preliminary analysis of how such a benchmark would behave,
average protocol emissions appear to trend downward as new validators come online. But it’s clear that the rate skyrockets with material increases to network activity resulting from a flight to safety (FTX’s insolvency) or new network activity (the recent PEPE göğüs coin frenzy).
A standardized ETH staking rate will provide immediate utility as:
As a benchmark, an ETH staking rate would work similarly to traditional instruments like overnight index swap (OIS) rates – delivering reference rate utility to market participants. From new crypto-native Sharpe ratios to pricing benchmarks, a standardized ETH staking rate can be used to discount future cash flows – letting investors better assess the present value of their investments in the Ethereum ecosystem.
(CoinDesk)
A standard staking rate would form the underpinning of an important new tool for risk transfer. Interest among natural hedgers, especially validators, and prospective speculators will result in the inevitable formation of a forward curve resulting in swaps, futures and other derivatives. Basis swaps with traditional rates or cross-currency swaps with fiat currencies could provide an interesting new crypto rate onramp, while also allowing structured products to proliferate.
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A new staking rate could unlock the next generation of financial products while serving as a building block of Ethereum’s monetary policy. As such, CESR represents an important development in the evolution of the Ethereum ecosystem and a new frontier for innovation in the world of decentralized finance and beyond.
NOTE: CoinFund recently announced that it had partnered with CoinDesk Indices to launch CESR, a composite ether staking rate.
