The world’s second-largest cryptocurrency experienced a significant drop in value after a historic update to its software that could change how it was regulated.
Ethereum, a technology used for many of the cutting-edge applications in cryptocurrency, saw its value drop from $1,600 a token on Sept. 15 to a little over $1,300 on Monday, an 18% decline in value since the currency embraced the “Merge,” an update to the crypto asset’s technology that will diminish the currency’s power consumption by more than 99%. It also comes after Securities and Exchange Commission officials threatened to treat Ethereum as securities, a categorization that would entail regulation.
Ethereum, which is swapped to “proof of stake” to save energy, requires users to have cryptocurrency invested to allow their computer to create new crypto tokens. This change in design “looks very similar—with some changes of labeling—to lending,” SEC Chairman Gary Gensler told the Wall Street Journal on Thursday. If Ethereum is redefined as a security, that will lead to the SEC regulating the currency in the same way it handles stocks and bonds.
Ethereum is not the only cryptocurrency to drop significantly in value in the last week. Bitcoin also reported a notable reduction in value last week, with single tokens dropping in value from $22,500 on Sept. 13 to less than $19,000 Monday morning.
The update had an enormous effect on cryptocurrency’s environmental impact, according to industry experts. The transition purportedly cut the electricity consumption and carbon footprint of the Ethereum network by over 99.988 % and 99.992%, according to a report from the Crypto Carbon Ratings Institute.
The Ethereum merge has been promoted for several years. Ethereum founder Vitalik Buterin wrote about “proof of stake” in a 2014 blog post before the currency came into existence and had been trying to pursue the “Merge” for at least two years. These efforts included partnering with the tech company ConsenSys to make the “Beacon” chain, a separate Ethereum blockchain that has operated on “proof of stake” since 2020.
The crypto industry has struggled to recover entirely from its “winter” in early summer, which led to a historic decline in value.