What the CFTC Chairman Actually Said About Ether Futures and Ethereum 2.0

The Takeaway:

  • CFTC Chairman Heath Tarbert said last month that ether is a commodity, and he expects to see regulated ether futures in the U.S. in the next six months.
  • The ethereum network is expected to transition from its current proof-of-work consensus mechanism to a proof-of-stake model over the next year, in an upgrade known as Ethereum 2.0.
  • Asked about this shift, Tarbert said Tuesday the CFTC is still evaluating whether ether will remain a commodity under the new model.
  • Ethereum developers and proponents believe proof-of-stake may actually bolster the case that ether is sufficiently decentralized to be considered a commodity in the eyes of U.S. regulators.

U.S. regulators are not yet sure about what to make of ethereums impending transition to a staking-based protocol.

Commodity Futures Trading Commission (CFTC) Chairman Heath Tarbert, who recently declared his view that the worlds second-largest cryptocurrency by market capitalization is a commodity that could support a futures market, said this week his agency is still evaluating whether this will remain true after ethereum upgrades its network sometime in the coming year.

Speaking at CoinDesks Invest: NYC conference on Tuesday, Tarbert said the CFTC and its sister agency, the Securities and Exchange Commission (SEC), were both thinking carefully about the forthcoming Ethereum 2.0 upgrade which is designed to replace the coins current proof-of-work (PoW) model for transaction validation.

In PoW, computer servers called nodes solve computationally-intensive mathematical equations in order to validate transactions and process new blocks. However, in Ethereum 2.0, these same nodes will stake wealth (in the form of ETH) and vote on new blocks rather than solve for them.

Staking is obviously different than mining in the sense that mining is by its very nature sort of more decentralized, whereas with the stake obviously it reduces energy costs because youre just giving it to one validator or line of validators, Tarbert said Tuesday.

The CFTC, which has been looking into ethereum and its potential shift to proof-of-stake (PoS) since at least December 2018, is now looking into how decentralized the ethereum network will be after the 2.0 upgrade. In addition, Tarbert said regulators are also examining the requirements expected of users to run nodes on the Ethereum 2.0 network.

Thats exactly the kind of analysis that that were undertaking and the SEC is undertaking right now, Tarbert said.

This analysis will be key for any evaluation and eventual approval by U.S. regulators for a regulated ether futures market – which according to Tarberts earlier statements is likely in the next six to 12 months.

Whats at stake

According to Jehan Chu, managing director of Hong Kong-based crypto investment firm Kenetic Capital, a regulated ether futures market would be game changing in th ...

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Tags: Ethereum, Ether, Commodity Futures Trading Commission, Futures exchange, Futures contract, United States of America, chairperson, U.S. Securities and Exchange Commission, Heath Tarbert, Kenetic Capital