A lead developer at Blockchair, Nikita Zhavoronkov, has sparked a heated debate by claiming that Ethereum layer-2 platforms operate as unregistered money service businesses (MSBs), potentially facing regulatory crackdown. With over $39 billion in total value locked, layer-2 platforms have become crucial for Ethereum's scalability. However, Zhavoronkov argues that their centralized control, custodial nature, and for-profit business model make them vulnerable to regulatory scrutiny.

Zhavoronkov points out that many layer-2 solutions rely on multi-signature contracts or "emergency councils" controlled by limited groups, contradicting their decentralized claims. Moreover, users don't directly control their funds on these platforms, which could be a liability if regulators target them. The developer also notes that layer-2 platforms generate revenue from transaction fees and token issuance, similar to traditional companies.

This warning comes as the United States Securities and Exchange Commission (SEC) is reportedly investigating Ethereum, which could lead to classification as a security rather than a commodity. This would subject layer-2 platforms to stringent regulations, compliance requirements, and potential sanctions, potentially stifling innovation and hindering Ethereum's scalability. While some dismiss Zhavoronkov's views, the SEC's involvement adds complexity to the situation, and the potential delay of spot Ethereum exchange-traded funds (ETFs) approval.