The SEC Set To Begin Running Bitcoin and Ethereum Nodes

July 31, 2019 / by Crypto.IQ

The US Securities and Exchange Commission is looking for quotes from contractors who will run the Ethereum and Bitcoin nodes for them. This move is in addition to numerous other blockchains such as Zcash, NEO, EOS, Bitcoin Cash, XRP ledger and Stellar.

What is the motivation behind the move?

Moving forward, the contractors will have to make additions of new blockchains as the SEC requires. The SEC has, however, not given any valid reason as to why it wants to operate its own nodes. The only explanation the agency has provided is stating that the objective is to support monitoring risk, compliance enhancement as well as to inform SEC policymaking on digital assets.

The SEC will ramp up its analytics to aid its blockchain complaisance investigations and monitoring. In essence, they have stated that the subscription will collect blockchain data from the various hosted nodes instead of offering the data through blockchain explorers.

SEC nodes to improve data analysis

Similarly, the data it would also wish to have included are mining difficulty and rewards, hashing power, and hashing algorithms.

Equally, it should also incorporate blockchain size, coin supply, as well as the quantity and size of transactions. Usually, most blockchain explorers provide this type of information for free. However, the SEC is focused on getting analysis instead of just the data as specified in the requirements to prospective contractors.

The agency has indicated that the contactor should show thoroughness in data cleaning and normalization, which is within the purview of audit testing of financial statements. The SEC has specified that all the data received from the genesis block forward will be required. It should then undergo regular updates throughout the day through a feed or an API method of their preference.

Implementing on-chain surveillance systems

The providers will also be required to be in a position of adding new blockchains as soon as three months after they start work. This implies that the SEC is seeking to apply on-chain investigation systems to monitor what is going on, but it is not yet clear why Bitcoin is in the mix. Anyone can operate a Bitcoin node and access all the data because it is a decentralized and open network, but the SEC has no authority over Bitcoin.

Previously, the agency has indicated that Ethereum is not a security, but it has not clarified whether XRP and the other tokens held on Ethereum are a security or not. It is yet to be established whether the system has been tailored to automatically identify tokens that are securities and those that are not.

Mixed reaction on the move

Following this development, there were mixed sentiments from various factions with users being divided between those who see this as a bullish sign towards acceptance by the SEC on crypto and those who believe the government will try to ban cryptocurrencies. Most users thought that this is one way of tracking transactions, while others indicated that most data on public blockchains could easily be accessed through blockchain explorers.