Ethereum Co-Founder Praises Gary Gensler
• Ethereum co-founder Joseph Lubin publicly praised SEC Chair Gary Gensler as a “shining knight of decentralization” at ETHDenver.
• Lubin cited the recent enforcement action against Kraken as an example of how the SEC is driving projects to decentralize themselves under securities laws.
• Gensler has become a symbol of decentralized regulation in the crypto space, although not everyone agrees with his approach.
Background on Joseph Lubin and Ethereum
Joseph Lubin is a Canadian entrepreneur and co-founder of Ethereum, one of the world’s leading open source blockchain platforms. He was speaking at ETHDenver, an annual event that brings together developers, entrepreneurs, investors, and other members of the blockchain community. The audience reacted with jeers when he praised Gensler for being a „shining knight“ in promoting decentralization.
The Howey Test
Lubin used the recent example of SEC enforcement action against Kraken to explain why its staking product was considered to be centralized – meaning it would fall under securities laws. The Howey Test determines whether a contract meets the definition of a security based on whether investors paid money in a common enterprise with the expectation of profits from others’ efforts. According to Lubin, Kraken violated this by advertising their staking product as decentralized when in fact it was generating yield based on their own efforts.
Kraken Settles With SEC
On Feb 9th, 2021 Kraken settled with the SEC and agreed to pay $30 million penalty due to allegations that they were operating an unregistered security offering through their staking program. This enforcement action had ripple effects throughout the crypto industry, spooking many other staking providers including Coinbase who have since said they are prepared to defend their program if necessary.
While some have criticized Gensler’s approach to regulating cryptocurrency projects, Lubin believes he is doing an excellent job promoting decentralization within these ecosystems and preventing fraudsters from taking advantage of investors looking for quick returns without understanding what they are investing in or taking responsibility for their actions.