The crypto community is discussing an unprecedented statement by the Securities and Exchange Commission (SEC) about the jus soli, which, according to the regulator, applies to transactions on the Ethereum network.

According to the SEC lawsuit against crypto enthusiast and blogger Ian Balina dated September 19, 2022, Ethereum transactions took place in the United States because ETH nodes are “clustered more densely” in the United States than in any other country.

The document states that Balina sold unregistered securities in the form of Sparkster (SPRK) tokens, and retail investors bought them by sending ETH to the Balina's pool, and their transactions were confirmed by nodes located in the United States.

“At that point, their ETH contributions were validated by a network of nodes on the Ethereum blockchain, which are clustered more densely in the United States than in any other country. As a result, those transactions took place in the United States. As alleged below, the SPRK tokens that Balina distributed to the pool were securities under federal law.”

According to data collected by Santiment, 46.15% of Ethereum’s Proof-of-Stake nodes are controlled by only two addresses, belonging to Lido and Coinbase. According to crypto analytics platform Messari, two-thirds of 4,653 active Ethereum nodes are in the hands of centralized web providers, with over 50% of that coming from US-headquartered Amazon Web Services (AWS), over 15% from Germany-based Hetzner and 4.1% from France-based OVH.

Crypto enthusiasts called SEC's claim a "scary precedent".

Some users pointed to the fact that the United States account also for a third of all bitcoin mining.

“Can Pierre in France be charged with a crime by USA for sending Ibrahim in Iran some btc?”

However, others underlined that most bitcoin miners use TOR to hide their physical location.

Concerns over the loss of decentralization and censorship resistance in the Ethereum network after The Merge have repeatedly been voiced in the crypto community. The inclusion of the Tornado Cash mixer on the OFAC sanctions list added fuel to the fire of heated discussions. In August, Ethereum co-founder Vitalik Buterin advocated burning the stakes of major Ethereum validators who agree to censor the ETH transactions at the protocol level.

In a developer call on August 18, Ethereum co-founder Vitalik Buterin mentioned two censorship scenrios with different level of probability. The first scenario supposes partial censorship when certain validators choose to exclude or filter sanctioned transactions. As a result, transactions may get delayed as they wait to be finalized by other validators that don't partake in censorship. The second scenario supposes “permanent censorship” when sanctioned transactions never get finalized, According to Buterin, the likelihood of the second scenario is small.

In a new dual interview with Coinbase CEO Brian Armstrong, Buterin says that if staking providers on the upcoming Ethereum network are faced with censorship from authorities, he thinks the “honorable” thing for them to do would be to quit staking rather than comply.