Qwick Takes: Crypto Pushes Back Against the SEC

Check out some of the top commentary:

John Joy, CEO and Managing Attorney at FTI Law

The Securities and Exchange Commission’s (SEC) legal battle with Ripple Labs has huge consequences for the crypto ecosystem as it may determine whether the SEC has the power to regulate cryptocurrencies. The SEC hit Ripple with an enforcement action in 2020 claiming that Ripple’s native token (XRP) was a “security” and by launching it without first registering with the SEC, Ripple had conducted an “unregistered securities offering” worth $1.3 billion.

Ripple hit back by arguing that XRP is not a “security” and hence the SEC has no jurisdiction to regulate it. So far, Ripple has inflicted a series of procedural blows by getting the court to order the SEC to turn over potentially sensitive documents relating to Bitcoin and Ethereum. If those documents show internal discussions where the SEC determined that neither of those coins were “securities,” it could be a killer blow for the SEC’s case and its power to regulate cryptocurrencies.

Jawad Nayyar, Co-founder & Chief Vision Officer at DAO PropTech

Cryptos represents the dawn of a new era where all value is represented in distributed ledgers. This definitely is a leap forward over existing systems. However, it doesn’t mean that crypto is without its problems. Crypto is not inherently asset-backed and gets its legitimacy from the consensus of the people which is not always enforceable. Crypto perhaps is not the destination but definitely a step in the right direction – the next stage in the ever evolutionary process of democratization of value creation and transfers system. We hope that absolute control by centralized institutions will diminish over time through the use of this technology.

Crypto’s Achilles heel will always be its lack of legal legitimacy. We believe the system is based on anarcho-capitalism, which is a system where capitalists rule with utmost freedom to the limit of anarchy. While anarcho-capitalism is the desired state for the libertarian school of thought, we believe it is not viable since societies currently cannot function without any governance structures at all. We believe cryptos will always remain at odds with the governments, as they pose a threat to the existing monetary system. Additionally, since crypto is neither legal tender nor asset-backed, they draw legitimacy through consensus mechanisms including proof of work. Early cryptos with proof of work consensus systems are an environmental concern and against our corporate values of sustainable growth.

In the long term, cryptos should outperform the inflation rate of their respective countries by at least a factor of two over the medium term. Cryptocurrency with all the inherent problems is of far more value than the fiat being printed around the world at phenomenal rates. However, since it’s a very volatile market, which lacks regulation it has a lot of room for insider trading and market manipulation. We don’t think that crypto trading is a good option but HODLing might be a good option as a hedge against money.

Kunal Sawhney, CEO at Kalkine Media

The Ripple and SEC lawsuit is being closely tracked by analysts, but the verdict may or may not have a profound impact on the wider cryptocurrency investment world. There is an anticipation that the lawsuit would eventually result in the SEC declaring not just XRP but all other crypto assets as “securities.”

The effect would be two-fold. One, the SEC would bring crypto assets under regulatory oversight. Two, this would inadvertently give cryptos a sort of legitimacy.

For now, things are very hazy. Do cryptos fall under the oversight of the SEC or the CFTC, or are these assets an outlier with no checks and balances with regard to consumer protection? Nobody exactly knows.

But more than this single lawsuit, it will be a clearly drafted piece of legislation or some other authoritative document that can lift cryptos out of uncertainty. Trillions of dollars are locked in crypto assets, and Americans may be holding a good share of this volatile but extremely popular asset class.

The ongoing bearish phase in cryptos calls for urgent action by regulators. Unpredictability and uncertainty in the crypto investment space is hurting the interests of retail investors.