Ripple Decision Sets Precedent for Crypto Regulation; Bitcoin Hits 1-Year High
SINGAPORE, July 14 (Reuters) – Bitcoin reached its highest point so far this year on Friday following a legal victory that ruled the cryptocurrency XRP as not being a security.
A U.S. judge determined on Thursday that Ripple Labs Inc did not violate securities law by selling its XRP token on public exchanges.
This case marks the first win for a cryptocurrency company in a lawsuit brought by the U.S. Securities and Exchange Commission (SEC). While the decision is specific to this case, it has created optimism among crypto investors that more cryptocurrencies may also be exempt from being deemed as securities.
Bitcoin soared to its highest price since June 2022, reaching $31,818, before slightly declining to trade around $31,235 at 1349 GMT on Friday.
Following the ruling, the second-largest token, ether, had its best session since March on Thursday, and XRP, which the judge ruled could be legally sold on public crypto exchanges, experienced a 73% surge on Thursday and maintained most of these gains on Friday.
As bitcoin retreated from its highs, the shares of crypto-related stocks rose during regular trading hours. These stocks had initially dropped in the pre-market on Friday.
“The regulatory environment is changing,” said Matthew Dibb, chief investment officer at crypto asset manager Astronaut Capital. “And by what we have seen in the last 24 hours, it could be for the better.”
Justin d’Anethan, head of business development in Asia at Keyrock, a digital assets market maker in Hong Kong, believes that the ruling serves as a precedent. He stated that finding XRP tokens sold on public crypto exchanges to not be securities under the law “probably serves as a precedent.”
“Ripple stakeholders were waiting for some regulatory clarity. Yesterday the court seems to have provided just that,” d’Anethan added.
Cryptocurrencies have been experiencing a gradual recovery this year after a sharp decline in prices last year and a series of bankruptcies among major crypto firms, including U.S. exchange FTX, which resulted in heavy losses for investors.
The collapse of FTX further propelled global regulatory efforts to regulate the crypto sector, particularly to protect small investors enticed by the promise of fast returns.
China has practically banned cryptocurrencies, and U.S. investigators have accused FTX founder Sam Bankman-Fried of multibillion-dollar fraud, to which he has pleaded not guilty.
Alex Mashinsky, founder of bankrupt crypto lender Celsius, was recently charged with fraud for misleading customers and artificially inflating the value of the company’s token, according to an unsealed U.S. indictment on Thursday. Mashinsky pleaded not guilty.
Mashinsky joins a list of crypto moguls facing indictments. Additionally, both Coinbase and its bigger rival Binance are facing lawsuits from the SEC, which they are fighting, and Binance is also facing legal action from other regulators.
A top SEC official stated last month that the industry has “an ethos built around non-compliance.”
However, crypto investors have found solace in BlackRock, the world’s largest asset manager, which filed to launch a bitcoin exchange-traded fund (ETF) last month. Additionally, exchange operator Cboe refreshed its filing for a similar fund to be managed by asset manager Fidelity.
As a risk asset, cryptocurrencies could also benefit from a weaker U.S. dollar.
“We’d gone through this long period of just consistently negative news to make the space look pretty grimy,” said Chris Weston, head of research at brokerage Pepperstone in Melbourne.
“For the first time in a while, it’s been consistently positive news coming through, and that means you’ve got momentum.”
Additional reporting by Vidya Ranganathan in Singapore; Editing by Simon Cameron-Moore and Alex Richardson
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