The chances of Ether (ETH) avoiding designation as a security are rising, according to a new report by JPMorgan. Staking platform Lido’s share of staked Ether continues to fall. Thus, this should reduce concerns about concentration in the Ethereum network.
“The share of Lido in staked ETH has decreased further from around one-third a year ago to around a quarter at the moment,” analysts led by Nikolaos Panigirtzoglou wrote. With the fall in concentration on the network, this could lead the SEC into thinking that Ether is not a security, based on the Howey test and analysis of the Hinman documents, which reveal how the SEC classifies securities.
Speaking on the Hinman documents, the analysts write they” revealed the role of network decentralization in the SEC’s thinking on whether a digital token should be classified as a security or not.” If the tokens on the network are sufficiently decentralized, the US regulator will no longer classify them as securities.
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According to the Howey test, a transaction considered to be an investment contract is classified as a security. If Ether avoids designation as a security, this will be another huge win for the cryptocurrency community, following in the footsteps of Ripple’s XRP.
Furthermore, the report adds that the recent Dencun upgrade should “help Ethereum to increase its dominance against alternative layer 1 blockchains and to recapture the lost market share due to previous scalability issues.”
Ethereum (ETH) has experienced a tumultuous journey throughout the second quarter of 2024. Currently priced at $3,381.97, the asset was down 5% last month. However, if it follows XRP’s footsteps successfully, avoiding security designation could see a significant jump for Ether.