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Tuesday, December 5, 2023

Will the SEC soon run out of powers over the crypto market?

The crypto community is eagerly following the battle of strength between Ripple and the SEC. A court ruling on this could point the way to the extent to which the exchange supervisory authority is responsible for the crypto market at all.

• SEC sues Ripple
• Cryptocurrencies a security?
• Out of court agreements

The dispute between the SEC and Ripple Labs began in December 2020 when the US Securities and Exchange Commission accused the payment platform Ripple Labs of violating securities regulations and therefore filed a lawsuit. Ripple had used the associated cryptocurrency XRP to finance its core business with cross-border transactions. This unregistered securities offering is said to have raised $ 1.3 billion.

Different views

The lawsuit came as a surprise to Ripple, because it was of the opinion that XRP does not fall under the “securities” category and that the sale would therefore not have been subject to approval. Ripple pointed out that the regulatory authority would ultimately also allow other cryptocurrencies such as Bitcoin or Ethereum to be traded like commodities, which therefore do not have to be registered as securities.

The SEC countered that the situation with XRP was different, after all, the token created by Ripple Labs was actively used to finance Ripple’s business. It basically represents an investment in the company itself, making XRP a security that falls under the supervision of the SEC.

Directional judgment

The lawsuit against Ripple has brought even more uncertainty into the already ongoing debate as to whether cryptocurrencies should be treated like securities, like raw materials, or like something of their own. This distinction is important because securities must be licensed and regulated by the SEC, and companies concerned must disclose certain information to the SEC.

The SEC under its new boss Gary Gensler is taking a tough course against the crypto industry. The authority feels responsible for crypto currencies and exchanges to ensure the protection of investors. Against this background, it becomes clear that the dispute between the SEC and Ripple must be viewed in the larger context. Because market participants hope the ruling will provide more clarity about what the crypto industry can expect from the SEC and the US judiciary in the future.

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Documents under lock and key

But now there has recently been an interesting development. According to “Investing.com”, the two parties have come to an out-of-court agreement that certain documents that have been requested as evidence by the other party will remain under lock and key. This could indicate that a settlement is pending, so that the lawsuit against Ripple could not be used as a precedent in the future.

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