David Schwartz, the Chief Technology Officer (CTO) of Ripple, has decided to back ConsenSys. This blockchain startup is facing legal action from the United States Securities and Exchange Commission (SEC) over claims that it sold unregistered securities through its MetaMask wallet.
Concerns regarding legislative overreach and the future of decentralized finance (DeFi) platforms have been raised by the case. In its latest lawsuit with the SEC, ConsenSys is accused of conducting an unregistered securities offering by allowing the sale of digital tokens using the popular Ethereum wallet and browser extension MetaMask.
The SEC claims that under United States law, these tokens, which were sold during many Initial Coin Offerings (ICOs), ought to have been registered as securities. ConsenSys has denied any wrongdoing in response to the accusations, claiming that MetaMask is just a platform for users to connect with the Ethereum blockchain and that the business has no influence over or approval of the sale of any specific tokens.
Industry Experts Recommend That SEC Draws Clarity Among Industry Players
Many of the industry experts who have commented on the dispute concur that the SEC has to take a more sophisticated approach to regulating the cryptocurrency sector. Carla Reyes, an associate professor of law and blockchain technology expert, stated that “the SEC needs to recognize the difference between software providers and the entities that issue tokens.”
An industry advocacy group, the Blockchain Association issued a statement denouncing the lawsuit and calling for more precise regulatory restrictions that protect investors and promote innovation. The Blockchain Association declared that penalizing ConsenSys for offering this tool is ineffective and damages the exact environment the SEC purports to defend.
David Schwartz, in a series of posts on his X platform, shows his support for ConsenSys. Schwartz emphasized the significance of separating software tools from user activities. He stated that allegations have been made against Ripple about the unregistered securities offering it carried out by selling its XRP coins.
Schwartz continues defense of ConsenSys, Explains MetaMask’s Activities
Schwartz, in his defense, compared the diamond industry, arguing that DeBeer’s intentions did not decide the diamond holder’s profits, as MetaMask, on the other hand, does not also decide the earnings of the users. He also highlighted an important difference between investment and business contracts.
Schwartz explained that there’s nothing about the existing business contract that decides the amount of profit the users will get. He then cleared that MetaMask is taking its cut for its services as stipulated in its agreement with its users. The amount of profit as well as its sources shared is currently beyond MetaMask’s control, and doesn’t rely on the company’s efforts.
Schwartz made his position known when he stated that there had been an agreement to provide management services and send funds to the right sources. These sources are said to belong outside the agreement, and not anywhere close to the party’s investment contract.
Schwartz said that the profits gotten from MetaMask services are not connected to Consensys’s efforts – instead, they come as a result of some obvious external market situations and selected user activities.
Schwartz Speaks on Securities, Encourages Exchanges To Leverage Recent Legal Developments
The Ripple CTO also spoke on the ongoing debate between Securities and the token. In his statement, he believes that everything becomes security if every cryptocurrency asset holder makes use of their assets. He also explained that any token that’s managed by mostly smart contracts cannot make everyone common holders.
Meanwhile, different recommendations from other regulatory bodies think that Amy Berman Jackson, the United States District Judge, in recent development agreed with Torres’s position on XRP’s secondary sales. In the case between Binance and the SEC, Judge Jackson turned down the SEC’s statement on the sale of secondary BNB by entities not recognized by Binance.
However, these court judgments have set a new precedence for virtually all cryptocurrency-related lawsuits in the United States. Top exchanges like Kraken, Coinbase, and Consensys who are currently in court for different redresses are expected to leverage this development in strengthening their position while in court.