Gary Gensler with ether coin
Photo illustration: Al Drago/Bloomberg via Getty Images; Protocol

Gary Gensler hints that ether’s a security too

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Tuesday: Gensler versus ether, AmEx hiring, and Opendoor’s stumble.

Off the chain

Bankruptcy experts may soon need to be blockchain analytics experts too. The judge in the Celsius case recently approved the appointment of an independent examiner. One issue that person may want to look into involves CEO Alex Mashinsky’s holdings of CEL, the token Celsius issued as a reward to depositors. One critic claims to have traced suspicious transactions to wallets apparently controlled by Mashinsky and his wife. The case could also raise novel issues about just how separate a company and a token are. Watch this space (and those wallet addresses).

— Owen Thomas (email | twitter)

Could Gensler put ether to sleep?

Gary Gensler just gave Ethereum an early Halloween scare. The SEC chair spooked crypto’s second-largest ecosystem by suggesting that the Merge may have turned its ether token into a security.

Gensler didn’t mention Ethereum or ether by name. But his recent remarks on how staking has features consistent with the definition of a security come on the heels of Ethereum’s big shift from proof of work to proof of stake. And they quickly sparked speculation that the regulator — who has long argued that most cryptocurrencies should be regulated as securities — was lumping ether in with the rest.

Staking holders expect a return. Staking, a mainstay of DeFi, sure looks like a system in which “the investing public is anticipating profits based on the efforts of others,” making the product offered a security, Gensler told reporters after testifying before the Senate Banking Committee last week.

  • Gensler reaffirmed during the hearing his view that bitcoin is not a security, unlike “a vast majority” of other cryptocurrencies. The biggest cryptocurrency, he argued, had “no group of individuals in the middle. So the investing public's not betting on somebody in the middle.”
  • Gensler’s views on ether, the most widely traded crypto token after bitcoin, have not been as clear. In his 2018 MIT lectures, he had said that, compared to bitcoin, “Ethereum is a bit more centralized and has more leadership,” with co-founder Vitalik Buterin playing a key role with a “sort of founder following.”
  • His predecessor at the SEC, Jay Clayton, made it clear he didn’t consider ether a security as far back as 2019. And many speculated that Gensler would follow that stance. So his comments on staking last week caught the Ethereum community by surprise. Ether’s price dropped about 11% after Gensler’s comments spread.

What is Gensler really saying? Ether’s price bounced back as investors and the Ethereum community realized the SEC chair’s remarks weren’t that clear. But that in itself may be a problem.

  • Cathy Yoon, chief legal officer at MPCH, argued that “calling ether a security after all this time, even after a change in the consensus mechanism, is a reach.”
  • Crypto entrepreneur Alex Dunmow suggested the SEC chair was “not talking about [ether] being a security” but was instead addressing “staking derivatives,” with a focus on crypto marketplaces like Coinbase, in a tweet. “Let’s not panic just yet,” Dunmow said.
  • The confusion speaks to a bigger issue, Yoon pointed out. The SEC under Gensler “has consistently said that no guidance or clarity from the commission is required because the law is settled,” but crypto companies and investors are grappling with a lot of uncertainty, she told Protocol.

Figuring out the SEC’s thinking on crypto has long been challenging. The regulator makes “large, grand statements,” Yoon said. But beyond pursuing “enforcement actions based on very specific facts and circumstances,” Team Gensler “has done nothing to drill down into their thought process and how they are applying existing laws and rules,” she said. There’s little clarity, and a lot at stake.

— Benjamin Pimentel (email | twitter)


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On the money

Nasdaq is getting into the crypto custody business. A new group within the stock exchange dedicated to digital assets will start out offering custody services for bitcoin and ether to institutional investors.

A much-anticipated bill targeting Visa and Mastercard swipe fees has been introduced to the House. The legislation’s backers hope to boost competition and lower costs by allowing merchants to route more credit card payments over networks not run by the two payment giants.

Meanwhile, American Express is on the hunt for tech talent. AmEx is seeking software engineers, coders and developers as part of a 1,500-person hiring spree.

On Protocol: The Treasury wants to hear your comments on crypto.

New data shows Opendoor has been hit hard by the housing slump. The iBuyer lost money on 42% of its transactions in August.

Ripple is pressing the court for a decision on the SEC's lawsuit against it. In separate motions, both Ripple and the SEC called for a federal judge to either rule that the XRP cryptocurrency violated federal securities laws or dismiss the lawsuit.

Crypto market maker Wintermute was hacked for $160 million. The DeFi company’s CEO, Evgeny Gaevoy, said the company remained “solvent” and its centralized exchange wasn’t affected.


Crypto payments are no longer hot, at least among customers of JPMorgan Chase.“We saw a lot of demand for our clients, let’s say up until six months ago,” Takis Georgakopoulos, the bank’s global head of payments, told Bloomberg Television. “We see very little right now.”

Private valuations in fintech haven’t fallen enough to kick off a real M&A boom. "Unfortunately, we've not seen the valuation adjustments that have happened in the public market kind of work their way through to the private market,"AvidXchange CEO Michael Praeger told Axios Pro.

Deal flow

San Francisco crypto data infrastructure provider Goldsky raised $20 million in a seed round. Felicis and Dragonfly Capital co-led the round.

New York lease-to-own fintech Kafene raised $18 million in a series B funding round. The round was led by Third Prime, joined by previous investors who participated in Kafene’s $30 million series A.

Majority, a mobile banking app for migrants to the U.S., raised $30 million in equity in a series B funding round along with $7.5 million in debt financing. Valar Ventures led the equity financing, with participation from existing investors.

Yellow Card Financial, a Nigerian cryptocurrency exchange, raised $40 million in series B funding. Polychain Capital led the round, coming almost exactly one year after the company’s $15 million series A.

Ethic, an investing startup that helps users align investments with their values, raised $50 million in a series C funding round. Jordan Park led the round with participation from Nyca Partners, Sound Ventures, Kapor Capital and others. The Duke and Duchess of Sussex entered into a corporate partnership with Ethic last year.


When your AR automation only focuses on making your team more efficient, you leave out one major factor: customer experience. Learn why finance leaders are taking a more collaborative approach to AR in our exclusive survey of 1,000 C-suite execs.

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Thanks for reading — see you tomorrow!

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