It shouldn’t surprise anyone if regulators begin telling node validators to impose KYC and AML needs on users staking Ether. 


Over the last few years, the cryptocurrency business has been a primary target for regulators within the united states.  

The legal battle between Ripple and the united states Securities and Exchange Commission (SEC), Nexo’s lawsuit with the securities regulators of eight states, and also the scrutiny targeting Coinbase’s Lend program last year are only many high-profile examples. This year, even Kim Kardashian had first-hand expertise with restrictive scrutiny when agreeing to pay a $1.26 million fine for promoting the dubious crypto project Ethereumax. 

While Ethereum developers intended to pave the method for key network upgrades within the future, it looks like the recent Merge has more difficult matters between crypto comes and U.S. regulators. 

Ethereum: Too substantial for the crypto market?

On Sept. 15 – the same day Ethereum’s Merge took place – SEC Chairman Gary Gensler expressed during a congressional hearing that proof-of-stake (PoS) digital assets can be thought of securities. Gensler same his reasoning was that holders will earn revenue by staking PoS coins, that might mean that there's an “expectation of profit to be derived from the efforts of others.” The latter is one amongst the essential components of the Howey test, used by the SEC and other U.S. authorities to work out whether Associate in Nursing asset is an investment contract and falls beneath federal securities law since it was passed into law in 1946. 

As you already know, Ethereum has shifted from the mining-based proof-of-work (PoW) to PoS, requiring validators to stake Ether to feature new blocks to the network. In alternative words, this implies that Ether might be the Securities Act of 1933, which might need the project to register with the SEC and suits strict standards to safeguard investors.

( Slava Demchuk, Cointelegraph, 2022 )