Everyone has been talking about the decision in the Ripple/XRP case which has potentially set a precedent in relation to whether crypto is a security or commodity.
The ruling states that XRP is not considered an investment contract, challenging the Securities and Exchange Commission’s (SEC) classification of most cryptocurrencies as securities. This decision has sparked optimism among members of the crypto community, who hope that the SEC will adopt a more hands-off approach in the future. Additionally, other crypto assets, including Solana (SOLUSD) and Polygon (MATIC), have rallied in response to the Ripple court order, as they were also previously classified as securities.
The ruling introduces the possibility that certain crypto assets could be traded as “unrestricted securities” if they meet specific criteria, such as being sufficiently decentralised or not sold directly to retail investors. Furthermore, it suggests that staking rewards may not be considered securities within the context of the Ripple ruling. This newfound judicial guidance is seen as a boon to token creators and markets, offering them alternative, non-violative methods for issuing and trading tokens.
The implications of the Ripple court order extend beyond token issuers. It also provides more flexibility for cryptocurrency exchanges in terms of listing assets. Coinbase, one of the largest crypto exchanges, sees this ruling as strengthening its legal standing in a lawsuit filed against it by the SEC. Similarly, other exchanges, including Kraken, have relisted XRP following the court order, potentially signalling their willingness to fight any SEC action.
However, it is essential to note that this court decision is not necessarily the final word on the matter. The SEC still has the option to appeal the ruling, and Congress may ultimately shape the regulatory classification of crypto assets through new legislation. Some experts believe that the SEC is likely to appeal, which could lead to a different outcome. Moreover, other courts may choose to adopt or disregard this particular ruling.
While the crypto industry celebrates this ruling as a temporary victory, it is crucial to address the need for comprehensive and purpose-built regulatory frameworks for cryptocurrencies and exchanges.
If you are someone operating in the crypto industry in the US, there is much uncertainty ahead and contemplating a restructuring of your business in to friendlier jurisdictions like Singapore or the UAE may be of interest for the long-term health and viability of your business.
The road towards free operations in the US is going to be long and winding, for those charting this path, a regulatory hedge is not something to only be considered, but something to be actively implemented at this stage.