JPMorgan: Risks of Ethereum being deemed a security may lessen as Lido's share weakens

A recent report from JPMorgan suggests a decrease in the concentration of staked ETH, particularly related to the stake held by the platform Lido, which has been a focal point of centralization concerns.

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Decrease in Influence of Lido

A report indicates that Lido's share of staked Ether has decreased from about one-third a year ago to approximately one-fourth currently.

According to actual surveys, Lido's staking market share is at 29.6%, while ether.fi has seen a significant increase to 2.9%.

This decline is seen as a positive change to reduce Ethereum centralization, which is crucial for the future regulatory handling of Ether. The diminishing influence of Lido may help alleviate concerns about a controlling entity potentially affecting the autonomy of Ethereum.

According to the investigation, as shown in the graph below, over the past three months, Lido's inflow of ETH has been overtaken by other protocols that offer vertical integration with staking rewards, and there has also been a significant increase in ETH outflow from Lido.

Is ETH a Security?

The discussion on Ether's status as a security is closely linked to the regulatory environment, especially after insights provided in the Hinman document released in June of last year. These documents reveal the U.S. Securities and Exchange Commission's (SEC) stance on cryptocurrencies, emphasizing the importance of network decentralization. The SEC has previously stated that tokens operating on fully decentralized networks may not be considered securities because they lack a central controlling entity as defined by the Howey Test.

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Ethereum's London Upgrade and Market Position

Within these discussions, Ethereum has also implemented the London upgrade aimed at addressing scalability issues that have hindered its performance. According to JPMorgan, this upgrade not only enhances Ethereum's functionality but also allows it to regain market share and strengthen its position against other L1 blockchains.

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As Ethereum continues to evolve, reducing centralization and improving scalability, the prospect of ETH escaping the security classification becomes clearer. This will be a significant milestone in Ethereum's journey, potentially transforming its regulatory landscape and enhancing its market position. JPMorgan's analysis is optimistic about Ethereum's future, and ongoing decentralization efforts may greatly alleviate past concerns associated with regulatory classification.