Judge offers reality check to crypto community

Judge offers reality check to crypto community

The Battle of Crypto Securities: Ripple vs Terra

In the world of digital assets, the question of whether a cryptocurrency qualifies as a security can have far-reaching implications. Recently, two federal judges in New York faced off on this very issue in separate cases involving Ripple and Terra. Surprisingly, the judges arrived at conflicting conclusions, creating quite a stir in the crypto community.

On one side of the ring, we have U.S. District Judge Anna Brown, who made the headlines with her ruling in SEC v. Ripple. According to her judgment, XRP, the cryptocurrency created by Ripple, is not a security. This decision was a major victory for Ripple, which has long been embroiled in a legal battle with the U.S. Securities and Exchange Commission (SEC). However, not everyone shares Judge Brown’s perspective.

Enter U.S. District Judge Jed Rakoff, an 80-year-old jurist and securities law expert. In the Terra stablecoin case, Judge Rakoff expressed a different viewpoint. He boldly declared that selling tokens on secondary markets does not change their status; they remain securities. He didn’t mince words when challenging Judge Brown’s ruling, noting, “the court rejects the approach recently adopted by another judge of this district in a similar case.” Awkward.

While Judge Rakoff’s ruling may have thrown a wrench in Ripple’s celebrations, it certainly gave a much-needed boost to the SEC. The regulatory agency, headed by the attention-hungry Gary Gensler, has been under fire since Judge Brown’s decision. Rakoff’s reputation as a seasoned securities law expert adds weight to his ruling and lends credibility to the SEC’s stance. Not stopping there, Judge Rakoff also dismissed Terra’s attempt to assert the major questions doctrine, emphasizing the significance of the crypto industry compared to other sectors like energy and tobacco.

The conflicting rulings from two judges in the same district have further muddied the waters surrounding the “when is crypto a security” question. While XRP’s price experienced only a slight dip following Judge Rakoff’s ruling, it’s evident that the crypto industry still yearns for clarity. Ripple’s lawyer, Stu Alderon, took to Twitter to clarify that Judge Rakoff’s decision has no bearing on Judge Brown’s determination that XRP is not a security in most cases. Thus, Ripple remains in the clear for now.

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It’s important to remember that these recent rulings are not the final word on the matter. The crypto industry will have to wait for a federal appeals court or perhaps the Supreme Court to provide a definitive answer. In the meantime, these conflicting decisions should serve as a catalyst for Congress to take action. The legislative branch has been more active than ever before regarding cryptocurrencies and the need for comprehensive regulations. A clear legal framework is essential to provide guidance and stability for market participants.

While the battle of crypto securities rages on, let’s take a look at some other recent developments in the ever-evolving world of decentralized finance.

Decentralized News

• Tether, the leading stablecoin, recently published an attestation from accounting firm BDO Italy. The report confirms Tether’s Q2 profit of $82 million, along with reserves that include $72 billion of cash and T-bills, and a $3 billion surplus.

• A German privacy watchdog is heading an investigation into the iris-scanning cryptocurrency project, Worldcoin. The focus of the inquiry is on consent and data security issues, reflecting the growing concerns around privacy in the crypto space.

• The SEC has filed a lawsuit against the founder of Hex, a “blockchain certificate of deposit” outfit, accusing him of selling unregistered securities. The lawsuit reveals the extravagant spending of $5 million on the world’s largest black diamond, shining a light on potential fraudulent activities within the crypto industry.

• FTX, a prominent cryptocurrency exchange, has proposed a bankruptcy plan that would partially repay customers in U.S. dollars while wiping out the value of FTT tokens. This plan aims to resolve the exchange’s financial struggles and ensure customer protection.

• Brian Armstrong, the CEO of Coinbase, recently stated that the SEC has instructed the company to cease offering all assets except Bitcoin. Armstrong argues that such a restriction would be detrimental to the growth and innovation of the crypto industry within the United States.

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As the world eagerly watches the “to be or not to be” spectacle of crypto securities, it’s important to keep an eye on other noteworthy developments in the crypto landscape. The battle between federal judges sets the stage for potential regulatory reforms while highlighting the pressing need for industry-wide clarity. The crypto industry’s fate hangs in the balance, awaiting the wisdom of higher courts or the guidance of Congress. Until then, the rollercoaster ride in the wild west of cryptocurrencies continues with full force.