The recent ruling by the Securities and Exchange Commission (SEC) in the case against Ripple has raised questions regarding the regulatory agency’s approach toward other cryptocurrencies it had formerly classified as securities.
On Wednesday, US District Judge Analisa Torres ruled partially in favor of Ripple, the company behind the digital currency XRP, in the case brought forth by the Securities and Exchange Commission.
The ruling, issued by the District Court for the Southern District of New York, stated that the “offer and sale of XRP on digital asset exchanges did not amount to offers and sales of investment contracts.”
However, the federal judge also ruled that XRP is a security when sold to institutional investors, as it met the conditions set in the Howey Test.
Nevertheless, the verdict led to an initial surge in the price of XRP, which rallied over 70%. The sudden rush to buy XRP lead to a spike in volume that overwhelmed some crypto exchanges.
For one, Uphold, a US-based crypto exchange, experienced technical difficulties and temporarily went down due to the unprecedented volume surge. Uphold has been among the few crypto exchanges that had continued to offer sales of the cryptocurrency.
“Yes, we went down but no platform could cope with the 50x spike in volume we saw today,” Uphold said in a tweet addressing the situation. It added:
“Uphold feels proud and vindicated to have been THE ONLY platform to stick with XRP through thick and thin over the past few years.”
Uphold is back up!
Yes, we went down but no platform could cope with the 50x spike in volume we saw today.
Uphold feels proud and vindicated to have been THE ONLY platform to stick with XRP through thick and thin over the past few years.
We’d love to give props to our law firm…
— Uphold (@UpholdInc) July 13, 2023
Furthermore, following the court ruling, several major US exchanges, including Coinbase, Kraken, and iTrustCapital, have announced plans to re-list XRP on their platforms.
Coinbase, the largest US-based cryptocurrency exchange, said it aims to begin trading for XRP “later today” if liquidity conditions are met.
Gemini, a crypto exchange owned by the Winklevoss twins, has also hinted at a possible re-listing in the near future. This re-listing activity indicates a renewed confidence in XRP’s status as a non-security.
Given today's ruling that the sale of XRP on exchanges is not a security, @Gemini is exploring the listing of XRP for both spot and derivatives trading.
— Gemini (@Gemini) July 13, 2023
Ripple’s Win Against SEC Could Positively Influence Other Altcoins
Last month, the SEC sued both Binance, the world’s largest cryptocurrency exchange, and Coinbase, the largest US-based cryptocurrency exchange.
In each case, the SEC noted that several tokens listed by the exchanges are unregistered securities, including dozens of popular cryptocurrencies like Binance’s native token BNB, Solana’s SOL, Cardano’s ADA, Polygon’s MATIC, Filecoin’s FIL, Cosmos’ ATOM, Sandbox’s SAND, Decentraland’s MANA, Algorand’s ALGO, Axie Infinity’s AXS, and Coti’s COTI tokens.
The ruling on XRP’s classification also had a positive impact on these altcoins as investors speculated whether the SEC would change its stance against these cryptocurrencies.
Solana (SOL) saw a 17% gain in value over the past 24 hours, with a significant 32% increase over the week.
Polygon (MATIC) and Cardano (ADA) also experienced gains of 16% and nearly 13% respectively.
Stellar Lumens (XLM) saw a massive 35% gain in value, while Filecoin (FIL) and Cosmos Hub (ATOM) also showed modest gains.
“This victory is important for the entire crypto market and other projects indicted by the SEC,” decentralized social media platform Floyx.com said in a tweet.
Crypto investor and analyst Miles Deutscher also claimed that the judge’s decision on XRP is a positive development for the broader cryptocurrency space
He noted that altcoins are responding very positively to the XRP “non-security” news, adding that BTC dominance has retraced by 2.84% as a result.
Ripple-SEC Case is Precedent-Setting for Crypto
The Ripple SEC case is important for the crypto industry as it could have significant implications for how other cryptocurrencies are regulated in the US.
The case centers around whether the XRP token is a security or a currency, and whether Ripple conducted an unregistered securities offering with it.
If the court rules that XRP is indeed a security and that Ripple violated securities laws, it could set a legal precedent for other cryptocurrencies, making it more difficult for them to operate in the United States without registering with the SEC.
On the other hand, if Ripple wins, it could potentially challenge the SEC’s authority and determine the regulatory landscape for the industry.
The SEC has been clamping down on some major crypto companies since the high-profile collapse of FTX last year.
Specifically, the commission has taken enforcement action against crypto exchanges Kraken and Bittrex, as well as crypto lending platform Nexo.
More recently, the commission joined forces with other regulatory agencies and filed a complaint against the CEO of bankrupt crypto lender Celsius, Alex Mashinsky.
The court filing by the SEC includes four counts of fraud and one count of securities violation. The complaint argues that Celsius (CEL) and its Earn product should be classified as securities.
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