IMPORTANT POINTS:
- The Ethereum Foundation is under investigation by an unspecified state authority.
- The research comes at a crucial time for Ethereum, especially related to interest in ETH ETFs in the US.
- The removal of the “assurance canary” on the foundation’s website could indicate that they have received a government request for information.
The Ethereum Foundation, the Swiss nonprofit at the heart of the Ethereum ecosystem, is under investigation by an undisclosed “state authority,” according to the group’s website GitHub repository.
The scope of the investigation and its focus were unknown at the time of publication. According to the GitHub commit dated February 26, 2024,
“We have received a voluntary inquiry from a state authority that included a confidentiality requirement.”
The Ethereum Foundation did not return a request for comment.
Changes in technology and the market
The research comes at a time of change for Ethereum technology and a potential turning point for its native asset, ETH, which many US investment companies are seeking to offer as an exchange-traded fund (ETF). The Securities and Exchange Commission (SEC) has delayed its efforts despite recently approving a number of Bitcoin ETFs.
Following the publication of this article, Fortune reported that the SEC is looking to classify ETH as a security, a move that would have major implications for Ethereum, an ETH ETF, and cryptocurrencies in general.
The financial regulator has sent investigative subpoenas to US companies in recent weeks, according to the Fortune report.
Withdrawal of the warranty canary
Previously, the disclosure on the Ethereum Foundation website stated:
“The Ethereum Foundation (Stiftung Ethereum) has never received contact from any agency anywhere in the world that requires keeping that contact secret. Stiftung Ethereum will publicly disclose any type of consultation from government agencies that exceeds regular business operations.”
The February 26 GitHub commit removed that footer along with the website warranty canary, according to the changelog.
A collateral canary is generally some form of text or visual warning (like a colorful bird, in the case of the Ethereum Foundation), which some companies include on their websites to indicate that they have never received a secret government subpoena or document request. .
If a government agency requests information, the company can remove the text, suggesting they received the request without explicitly saying so.
The Ethereum Foundation previously removed its collateral canary by mistake in 2019 and quickly added it back to the website.
Possible explanations
A lawyer familiar with the situation indicated that a Swiss regulator may have sent a document request to the Ethereum Foundation and may be collaborating with the US Securities and Exchange Commission (SEC).
“I also think it’s fair to say that the Ethereum Foundation is not the only entity they are seeking information from,” the lawyer told CoinDesk, indicating that other offshore entities are receiving scrutiny.
The SEC is evaluating multiple applications for an Ether ETF, but analysts monitoring the process are becoming less and less optimistic about the federal regulator approving these applications, citing a lack of engagement between applicants and SEC officials.
“Any rumors of any activity” that the SEC and its overseas counterparts are engaging in may be correlated to the May 23 deadline facing the SEC, the lawyer said.
