SEC vs. cryptocurrency exchanges: the Ripple case will define the regulatory future

Key facts:
  • If it is concluded that XRP is a security, it would set a precedent to qualify other altcoins as such.

  • If XRP wins the lawsuit, the altcoin industry would have an easy time growing in the US.

This week, the industry around bitcoin (BTC) and cryptocurrencies received two strong blows from the US Securities and Exchange Commission (SEC).

On Monday, the state entity filed a lawsuit against the Binance exchange for alleged violations of securities laws in the United States. The next day, the Coinbase exchange met the same fate.

In both lawsuits, as reported by CriptoNoticias, the SEC argues that the aforementioned companies allowed the trading of securities (securities) not registered. Specifically, 12 digital currencies would fall into this category: Binance Coin (BNB), the stablecoin Binance USD (BUSD), solana (SOL), cardano (ADA), polygon (MATIC), filecoin (FIL), cosmos (ATOM), sandbox (SAND), decentraland (MANA), algorand (ALGO), axie infinity (AXS) and coti (COTI).

XRP, a veteran in the “fight” against the SEC

In all this, there is nothing new under the sun. Since the end of 2020, the SEC and the company Ripple (issuer of the digital currency XRP) are in a legal dispute for similar reasons. Therefore, what has happened and will happen with this case, could be an important indicator for the course of the lawsuits against Binance and Coinbase.

As CriptoNoticias announced at the time, the regulatory entity maintains that Ripple has sold unregistered securities (the XRP currency) without having the proper authorization. Ripple, for its part, is fighting to prove that its XRP product does not meet the characteristics of a security and should be classified as a commodity, just like bitcoin.

There is a general feeling that the litigation is about to end. Although, it is worth clarifying, several completion dates have already been predicted in the past, which were not accurate. In any case, when a final and unappealable decision is reached, whatever it may be, the cryptocurrency industry in the United States will be able to breathe a sigh of relief.

If the SEC is successful in showing that XRP is a security and that Ripple violated the laws by not registering it as such, this could set a precedent for other cryptocurrencies, including those mentioned in the recent lawsuits against Binance and Coinbase, to also be classified as such. unquestionable as values. This would require the companies that issue them and the platforms that list them for trading to register with the SEC and meet a number of regulatory requirements, which can pose a significant burden.

If that were to happen, it could completely change the landscape of altcoins as we know them.

Its trade and issuance would not be allowed (at least, in a simple way) in the United States. It will be necessary to see if that represents a lethal blow for this flourishing industry or if it simply leads to a geographical relocation. Other countries, without a doubt, are eager to receive this multimillion-dollar business on their land.

On the other hand, if Ripple is successful in its defense and manages to prove that XRP is a currency and not a security, it could pave the way for other cryptocurrencies to operate with less SEC oversight. This could encourage more companies to enter the space and innovate.

What is an unregistered security?

A security, also known as a security, is a financial instrument with intrinsic monetary value that can be traded in markets. On the other hand, a merchandise or commodity is a basic good used in trade that is interchangeable with other goods of the same type.

The main distinction between a value and a commodity lies in the purpose and nature of the good. While securities are generally investments that give holders rights, commodities are basic goods that are often used as inputs in the production of other goods or services.

In terms of cryptocurrencies, the SEC views bitcoin as a commodity, not a security. The main reason for this is that bitcoin, unlike other cryptocurrencies and tokens, was not issued in an initial coin offering (ICO) and does not represent rights to the assets or income of a company or entity. Instead, bitcoin is a digital currency that is used to transfer value and is exchangeable for other goods and services, characteristics closer to a commodity.

Knowing this, then, we can understand that an unregistered security, for the SEC, is a security that has not been registered with that entity. Purportedly to protect investors, the SEC requires companies that issue and facilitate the trading of securities to register and meet certain regulatory requirements (which neither the two exchanges mentioned here, nor the issuers of cryptocurrencies do). affected by these demands).

The XRP case will give regulatory clarity

Ripple case outcome will provide greater regulatory clarity and will help define how cryptocurrencies will be classified and regulated in the United States in the future.

So while the current SEC lawsuits may challenge the industry in the short term, they could also be the catalyst for crafting a clear regulatory framework.

Will that regulatory framework be better? will it be worse? Will have to check it out when it arrives. But yes, without a doubt, it will be clearer and that is what the main players in this business need.

Disclaimer: The views and opinions expressed in this article belong to its author and do not necessarily reflect those of CriptoNoticias.


Leave a Reply

Your email address will not be published. Required fields are marked *