Blockchain company Ripple has been running an unregistered offering, akin to an unlicensed stock sale, according to a complaint filed Tuesday by the US Securities and Exchange Commission.
The suit revolves around XRP , launched in 2013, which Ripple calls a cryptocurrency. The SEC says XRP is an “unregistered securities offering to investors in the US and worldwide.”
“Issuers seeking the benefits of a public offering, including access to retail investors, broad distribution and a secondary trading market, must comply with the federal securities laws that require registration of offerings unless an exemption from registration applies,” said Stephanie Avakian, SEC Enforcement Division director, in a statement.
Tuesday’s suit amounts to one of the most significant federal actions taken to shift unlicensed cryptocurrencies under the umbrella of more traditional registered securities. As the crypto industry has exploded in the last decade, the SEC and other agencies have struggled to classify and regulate them. In a separate action, the US Treasury’s Financial Crimes Enforcement Network last week proposed new disclosure rules to better keep tabs on crypto wallets.
XRP’s value had fallen by about 22% by early Wednesday, having almost completely wiped out the gains of the past month that took it to two-year highs.
The San Francisco company, along with co-founder Christian Larsen and CEO Bradley Garlinghouse, were named in the suit. The executives have personally sold about $600 million in XRP, the SEC said.
Ripple violated federal securities laws by not registering XRP as a security, which would require greater disclosure, giving investors a more complete background as they value it, the SEC said.
“Here, we allege that Ripple and its executives failed over a period of years to satisfy these core investor protection provisions, and as a result investors lacked information to which they were entitled,” said Marc P. Berger, deputy director of the SEC’s Enforcement Division.
Garlinghouse late on Tuesday said the SEC hadn’t given the company “clarity” on how its XPR offering is classified – currency or security.
“To be clear, this is all based on their illogical claim that XRP is, in their view, somehow the functional equivalent of a share of stock,” Garlinghouse wrote on Ripple’s company blog .
Ripple had begun its campaign against the SEC suit before it was even filed. Garlinghouse had let loose on the SEC on Twitter, saying in part that its chair, Jay Clayton, was “taking notes from the Grinch this holiday season.”
The suit comes just weeks before Clayton is set to depart from his SEC post, as a new administration takes over Washington.
Two of Ripple’s lawyers on Tuesday said the SEC’s suit was without merit.
Michael Kellogg, of Kellogg, Hansen, Todd, Figel & Frederick, said in a statement: “This complaint is wrong as a matter of law. Other major branches of the U.S. government, including the Justice Department and the Treasury Department’s FinCen, have already determined that XRP is a currency. Transactions in XRP thus fall outside the scope of the federal securities laws. This is not the first time the SEC has tried to go beyond its statutory authority. The courts have corrected it before and will do so again.”
Janet Yellen Confusing Stance on Cryptocurrency Creates Mixed Feelings
Janet Yellen, the new Treasury Secretary of the United States, response to Senator Maggie Hassan question on cryptocurrency being used by terrorists and criminals has created mixed feelings across the crypto space.
Before the Senate Finance Committee, Yellen said “Cryptocurrencies are a particular concern. I think many are used—at least in a transactions sense—mainly for illicit financing.”
She further stated that she wanted to “examine ways in which we can curtail their use and make sure that [money laundering] doesn’t occur through those channels.”
Yellen’s response plunged Bitcoin and other cryptocurrencies as investors interpreted it as ‘Biden administration going after cryptocurrency holders’.
Janet Yellen later clarified her response following the huge media coverage her response got and the resulting negative impact on the price of Bitcoin and other cryptocurrencies.
In the written testimony, the finance committee later asked her “Bitcoin and other digital and cryptocurrencies are providing financial transactions around the globe, like many technological developments, this offers potential benefits for the U.S., and our allies. At the same time, it also presents opportunities for states and non-state actors looking to circumvent the current financial system and undermine American interests. For example, the Central Bank of China just issued its first digital currency.”
“Dr. Yellen, what do you view as the potential threats and benefits these innovations and technologies will have on U.S. national security? Do you think more needs to be done to ensure we have appropriate safeguards and regulations for digital and cryptocurrencies in place?”
Yellen replied: “I think it important we consider the benefits of cryptocurrencies and other digital assets, and the potential they have to improve the efficiency of the financial system.”
She continued, “At the same time, we know they can be used to finance terrorism, facilitate money laundering, and support malign activities that threaten U.S. national security interests and the integrity of the U.S. and international financial systems,” elaborating:
“I think we need to look closely at how to encourage their use for legitimate activities while curtailing their use for malign and illegal activities.”
“If confirmed, I intend to work closely with the Federal Reserve Board and the other federal banking and securities regulators on how to implement an effective regulatory framework for these and other fintech innovations,” Yellen concluded.
In December, the Securities and Exchange Commission (SEC) filed a lawsuit against the world’s third most capitalised cryptocurrency, Ripple (XRP) to change its operation as currency.
The uncertainty surrounding what the new administration might do to regulate the crypto space continues to weigh on the cryptocurrencies.
Bitcoin Price Drops to be Used as Buying Opportunity: deVere CEO
Bitcoin Price Drops to be Used as Buying Opportunity: deVere CEO
The Bitcoin price drop will be used as a key buying opportunity by savvy investors, predicts the CEO of one of the world’s largest independent financial advisory and fintech organisations.
The observation from Nigel Green, the chief executive and founder of deVere Group, which has $12bn under advisement, comes as the price of the cryptocurrency plummeted 11% on Thursday.
Earlier this month it valued at $42,000. On Friday at 12 noon (CET) one Bitcoin was valued at $31,400.
Mr Green says: “Bitcoin bashers and crypto cynics have been revelling in this week’s price drop.
“However, for many savvy investors, falling prices will be used as a key buying opportunity. They know the long-term trajectory of digital currencies – like stock markets – is upwards.
“They will be, sensibly, treating the volatility in cryptocurrency markets as they would in traditional markets. By topping up their portfolios when prices are lower and/or taking advantage of lower entry points, they can often considerably strengthen their position. The crypto market is no different.”
He continues: “I believe we can expect further pull-back in the price in Bitcoin in the near-term, which too will be used proactively by traders.
“But make no mistake, in the long-term, prices are going in one direction: up.
“Why? Because of the digitalisation of economies and every aspect of our lives, including our financial lives, that shows that there will be an increasing demand for digital, global, borderless money – characteristics that are inherent to the likes of Bitcoin.
“Also, due to the consistently surging interest from institutional investors, multinational companies, household name investors and government agencies.
“This was evidenced, once again, last year with the decision by PayPal, one of the biggest payment companies in the world, to allow customers to buy, sell and hold Bitcoin.”
Last week, the deVere boss championed greater regulatory scrutiny of cryptocurrencies such as Bitcoin as they play an increasingly normalised role for investors.
He noted: “There is sustained and growing interest in the likes of Bitcoin from both retail and institutional investors. They are now increasingly handling the assets as they would any other asset in the portfolio –for example, sometimes profit-taking, sometimes reinvesting, using the volatility to their advantage, and using these alternatives to help with all-important diversification.
“These mainstream, normalised investor strategies demonstrate that cryptocurrencies must come into the regulatory tent and be held to the same standards as the rest of the financial system.”
Mr Green concludes: “Volatility in the crypto market, as in all financial markets, is not necessarily a bad thing for investors and can be capitalised for their long-term financial gain. Harnessed effectively, it can be a very powerful strategy.”
Bitcoin Needs Greater Regulatory Scrutiny – and Here’s Why: deVere CEO
Greater regulatory scrutiny of cryptocurrencies such as Bitcoin must become a priority as they continue to play an increasingly normalised role for investors, says the CEO of one of the world’s largest independent financial advisory and fintech organisations.
deVere Group’s chief executive and founder Nigel Green – a long time advocate of cryptocurrencies – is speaking out after both the UK’s Financial Conduct Authority (FCA) and the president of the European Central Bank (ECB) called for more robust regulations for cryptocurrencies this week.
The calls follow the price of Bitcoin jumping more than 300% last year and gained a further 40% earlier this month to reach an all-time high.
Mr Green says: “The calls by financial watchdogs and central banks for greater regulatory scrutiny must be championed as digital currencies, including Bitcoin, are set to play an ever greater role in the international financial system.
“What’s needed is a strong regulatory framework to be established and approved at an international level. The forthcoming UK-hosted G20 summit might prove to be the ideal opportunity.
“Such regulation will help protect investors, tackle cryptocurrency criminality, and reduce the potential possibility of disrupting global financial stability, as well as offering a potential long-term economic boost to those countries which introduce it.”
He continues: “There is sustained and growing interest in the likes of Bitcoin from both retail and institutional investors. They are now increasingly handling the assets as they would any other asset in the portfolio –for example, sometimes profit-taking, sometimes reinvesting, using the volatility to their advantage, and using these alternatives to help with all-important diversification.
“These mainstream, normalised investor strategies demonstrate that cryptocurrencies must come into the regulatory tent and be held the same standards as the rest of the financial system.”
Previously, the deVere boss has said that one of the best ways to address the regulatory issues is via the exchanges.
“Nearly all foreign exchange transactions go through banks or currency houses and this is what needs to happen with cryptocurrencies. When flows run through regulated exchanges, it will be much easier to tackle potential wrongdoing, such as money laundering, and make sure tax is paid,” he has noted.
“For this to happen, banks will need to open accounts for exchanges, which is why they must be regulated.”
Mr Green concludes: “Cryptocurrencies in some form or another are here to stay – and the market is only set to grow.
“There can be no doubt that regulation of the crypto ecosystem is required and, I believe, it should be a priority.
“The work being done by many international financial watchdogs, lawmakers and central banks, such as the FCA and the ECB, in this area is something I fully support.”
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