The U.S. Securities and Exchange Commission (SEC) is reviewing the latest round of bitcoin exchange-traded-fund (ETF) applications, though the countdown for its required response doesn’t officially begin until after it files in the federal register. A futures-based bitcoin ETF recently began trading after the SEC failed to respond to the application. The securities watchdog, which has yet to approve a spot bitcoin ETF application, opened a public commenting period last week on all five of Cboe’s ETF applications: Wise Origin, WisdomTree, VanEck, Invesco Galaxy and ARK 21Shares. In a separate document, the SEC also asked for comments on BackRock’s iShares Bitcoin Trust, which was unexpectedly filed in June and rekindled interest in the traditional investment vehicle.
Network of Networks
Ethereum sidechain Gnosis said a pair of new product offerings could let consumers with crypto wallets pay for online purchases using stablecoins and Visa’s payment system. Gnosis Pay is reportedly the first decentralized payment network integrating with a traditional payment processor and Gnosis Card is allegedly the first Visa-certified consumer debit card directly connected to an on-chain self-custodial wallet, according to Gnosis. Separately, decentralized crypto exchange Uniswap unveiled a beta version of UniswapX, a new blockchain protocol used for trading across automated market makers (AMMs) and other liquidity sources.
Binance Shorts
Traders appear to be shorting Binance’s exchange token BNB, according to negative funding rates in derivatives markets that recently dropped to the lowest level since late April. This follows several departures of high level executives at the world’s largest crypto exchange, which is also currently being targeted by several governmental agencies in the U.S. and E.U. CoinDesk markets analyst Omkar Godbole reported there is a chance for a BNB “short squeeze” if the token’s price move up. Meanwhile, Binance has officially integrated the Lightning Network after stating last month it set up Lightning Network nodes.
The reaction to last week’s court ruling on the sale of Ripple’s XRP token makes no sense. After a two-year legal battle instigated by the U.S. Securities and Exchange Commission, a judge ruled that XRP is an unregistered security when sold to institutional buyers but isn’t when it’s bought by anyone else.
In 2020 the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Ripple, its CEO Brad Garlinghouse and co-founder Chris Larsen, alleging failure to register its token XRP as a security before selling around $1.3 billion worth. What followed was years of Twitter spats and incremental legal advancements as Ripple attempted to argue how fundamentally incorrect it is to call XRP a security.
But Thursday’s news has done basically nothing to make clear where crypto will stand in the eyes of U.S. law. We know where the SEC stands – everything is a security except Bitcoin and maybe Ethereum – but the SEC isn’t the end all be all.
Now we’re in this weird world where we have a crypto asset that is an unregistered security sometimes. Sure, there’s a difference between retail and institutional buyers here since retail did not (and is not) buying XRP directly from Ripple so there cannot be an investment contract between retail investors and Ripple.
Still, I submit that this makes no sense. It’s like saying someone who buys a house as an investment is buying real estate, but a person who buys a house to live in is not buying real estate. It’s nonsense. Either XRP is a security, or it is not. These should be mutually exclusive.
So, no, JMP Securities, this is not a milestone win for the crypto industry. I know you published a research note that stated this ruling “provides legal clarity and defense around what does and does not constitute a security, and that overall outcome is in favor of what many in the industry had been arguing” but that’s not what was provided here at all.
Instead, the court decided that the answer to “is this a security?” was – like many things in finance – ”it depends.”
