On Wednesday, the XRP cryptocurrency rose as investors grew optimistic that Ripple, a company closely affiliated with the token, would prevail in its protracted legal battle with the US Securities and Exchange Commission.
According to CoinGecko data, the cryptocurrency was worth roughly 45 cents at around 8 a.m. ET, up more than 11% in the previous 24 hours. It was previously trading up by up to 20%.
Traders pointed to a supplemental notice sent by Ripple on Monday, which referenced a judgment in a different matter involving Binance.The United States rescue plan for the failed cryptocurrency lender Voyager Digital. Binance’s US unit intended to pay $1.3 billion for all of Voyager’s assets, including its native VGX coin.
According to Ripple’s notification, the SEC rejected the idea, claiming that VGX was a security and that Binance was an unregistered securities exchange.
According to the Ripple letter, the judge rejected the SEC’s objections and approved the bankruptcy plan, citing the “vagueness” of the regulator’s arguments and stating the SEC had not “offered any guidance at all as to just what it was that the Debtors allegedly were supposed to prove” to demonstrate VGX was not a security.
Ripple, CEO Brad Garlinghouse, and co-founder Chris Larsen are accused by the SEC of violating US securities laws by selling XRP without first registering it with the regulator. Ripple disputes the SEC’s charges, arguing that XRP should be classified as a digital currency rather than a security.
Monica Long, president of Ripple, told CNBC Wednesday morning that she was “very hopeful” about a happy ending to the SEC case, adding that she believes it will be resolved this year.
Long believes the judge will find in favor of the SEC “because, in our opinion, both the facts and the law are on our side.”
If XRP is classified as a security, it could have far-reaching consequences for the digital currency sector.
Floods of tokens may wind up in the same category, making them regulated financial instruments requiring SEC oversight and regular transparency disclosures.
The market’s mood is improving.
Both Ripple and the SEC have now filed their final batch of documents in the matter, requesting a summary judgment. The lawsuit is currently before Judge Analisa Torres of the Southern District of New York, who is likely to rule soon.
It is unclear when she will make her choice. However, some cryptocurrency investors expect a decision will be made in the coming days.
XRP “is being bolstered by a potential positive outcome in the SEC case,” said Vijay Ayyar, vice president of international at cryptocurrency exchange Luno, in an email to CNBC on Wednesday.
According to Ayyar, the coin, which is the sixth-largest in the world by market value, is also benefiting from the larger crypto market attitude.
Bitcoin has increased by 70% since the beginning of the year and is now trading above $28,000 for the first time in nine months. Ether, the second-largest coin, is up 50% year to date.
“Overall, crypto markets have rallied in the last week or so, given the expectation of a pause or slowing in interest rates and a slowing in inflation,” Ayyar writes.
Regulation through enforcement?
Ripple’s Long stated that she believed the SEC was regulating the sector through enforcement rather than adopting clear regulations. She said that Europe is more advanced in its approach to cryptocurrency, citing the bloc’s Markets in Crypto Assets law as an example.
“We’re seeing action through enforcement rather than clear rules and regulation, which is what everyone in the industry wants,” Long explained.
“Europe is emerging as a leader in establishing really clear regulations and rules that allow crypto companies as well as traditional finance to embrace crypto.”
The SEC, for its part, has stated that it wants all cryptocurrency companies and projects to comply with federal securities laws.
“There’s a handful of tokens that have actually registered,” SEC Chair Gary Gensler said in an interview with CNBC in February, following a crackdown on the crypto market Kraken. The middlemen, or storefronts if you will, that customers invest in and at must properly comply and detangle these bundled items.”
“Time-tested rules and laws to protect the investing public are essential if this field is to survive and succeed.”
In recent weeks, the government has targeted a number of cryptocurrency firms, accusing them of engaging in illegal securities offers.
Paxos, a stablecoin issuer, said the SEC served them with a notice threatening legal action over claims that BUSD, Binance’s native stablecoin, was a security that should have been registered with the regulator.
The regulator also charged cryptocurrency lender Genesis and exchange Gemini, arguing that a high-yield investment instrument offered by the two companies should have been classified as a security.