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The Canadian-founded Ethereum network, the biggest thing in cryptocurrency after bitcoin, recently underwent an upgrade called “the Merge” that made it a lot more environmentally friendly.

But what’s good for the environment does not seem to be good for investors.

Ethereum’s ether, the cryptocurrency that runs on it, is a de facto way to invest in the platform, and it is the world’s most valuable token after bitcoin. Since the Sept. 15 Merge, which reduces Ethereum’s power consumption, ether has fallen 10 per cent to about US$1,320.

Over the same period, bitcoin, a sort of benchmark for the crypto industry, fell by under 4 per cent.

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There are many reasons for ether’s postMerge plunge. The one most troubling might be that the Merge, which changes the fundamental nature of the network, has also put Ethereum in the crosshairs of the U.S. Securities and Exchange Commission. It’s the latest case in which the name of Ethereum has come up in enforcement talk one way or the other.

Ethereum, for all its promises, is looking to be a lot more shaky as an investment.

The brainchild of Toronto-raised Vitalik Buterin, Ethereum is essentially a computing platform upon which anyone can build blockchain-based games, apps and peer-to-peer financial instruments. Most NFTs (non-fungible tokens), the expensive digital pictures, run on Ethereum. The platform is also at the centre of the talk about Web3, a proposed next-generation iteration of the Internet.

One estimate puts the value of everything on Ethereum at US$585-billion. If Ethereum was a publicly traded company, that would put it among the top 10 in the world.

The recent Merge changed the way the network is upheld. Instead of “mining” by solving mathematical puzzles, a power-hungry process, users now “stake” their ether coins, locking them up and receiving the equivalent of interest in return.

On the surface, that’s great for some investors. But a coin that comes with staking is potentially a security, according to the U.S. Securities and Exchange Commission. SEC chair Gary Gensler, who has been rather hard on crypto, did not single out Ethereum when he made that comment. But he did say it on the day of the Merge in direct response to reporters’ questions.

What this means is that an ether coin, in the eyes of U.S. law, could be akin to a share of a company, rather than say, a commodity, like gold – or bitcoin and ether before the Merge, both of which the SEC has said were not securities.

That is significant because the SEC claims jurisdiction over not just securities in the United States but all of the Ethereum network. In a recent court filing, the SEC cited the fact that because most of the servers that support Ethereum are in the United States, everything that happens on the Ethereum network is deemed to have happened in the United States.

That is in line with another development that had come out of the United States earlier this year. The U.S. government has, for the first time, brought in sanctions against not a company or a person, but a specific Ethereum application called Tornado Cash.

That sanction makes it illegal for “U.S. persons” to have anything to do with Tornado Cash – but that doesn’t mean foreigners are spared. As seen in the charges laid this year against two Europeans for the breaching of a different sanction by an American (the one-time Ethereum executive Virgil Griffith), even if you’re not American, you’ll be deemed to have committed an American crime if there’s an American involved in there somewhere.

The United States is not just increasingly active in policing crypto, but like many things the country has done in the past, it is projecting this policing way past its borders. And enforcement actions involving Ethereum, in one way or another, have been increasing and broad.

That’s worrying because, unlike the more decentralized bitcoin, Ethereum has an actual organization behind it and a named founder still actively working on it. Ethereum and the value of ether will never be able to endure the sort of regulatory shocks that bitcoin has shrugged off, like that mining ban from China last year.

Now, the Merge, for all the technical good Ethereum developers had hoped it would do, has become one more reason for regulators to target the network.