At CoinDesk’s 2022 Consensus event, Ripple’s CEO projected in an interview that Ripple will have spent “over $100 million on legal fees fighting the SEC” by the end of its trial. Financial advisors should pay attention to Ripple’s hearing because it could have significant consequences to how we define securities, as DJ Windle writes today.
Also in today’s newsletter, Jackson Wood explains how direct investment into cryptocurrency is just one way clients of financial advisors can participate in the new asset class.
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The Securities and Exchange Commission (SEC) lawsuit against Ripple, related to the sale of the XRP token, has been one of the most controversial and hotly debated topics in the cryptocurrency industry. The lawsuit alleges Ripple conducted an unregistered securities offering by selling XRP, which is the cryptocurrency used by the Ripple network. The case has been closely watched by the cryptocurrency community because of the potential implications for the classification of cryptocurrencies as securities.
Financial advisors should care about the outcome of the SEC lawsuit against Ripple and XRP because it could have significant implications for their clients and the entire financial industry. If XRP is deemed a security, it could lead to increased regulatory oversight and restrictions on the use of cryptocurrencies. This could negatively impact the value of XRP and other cryptocurrencies and create legal and regulatory uncertainty in the cryptocurrency industry that could make its way into traditional finance.
Financial advisors may need to reassess their recommendations regarding cryptocurrencies if they become subject to more regulatory oversight and restrictions. Advisors who have recommended XRP or other cryptocurrencies to their clients may need to inform them about the potential risks associated with these investments and discuss strategies for managing these risks.
The outcome of this lawsuit could have broader implications for the traditional financial world. It could create a more restrictive regulatory environment for cryptocurrencies and initial coin offerings (ICO), making it more difficult for financial institutions to adopt and integrate these assets into their operations. This could limit the potential benefits that cryptocurrencies could bring, such as faster and cheaper cross-border payments.
The lawsuit is not, however, just about XRP. Instead, it is about the broader question of whether cryptocurrencies are securities and a redefining of the question, “What is a security?” If the court decides XRP is a security, it could set a precedent for the classification of many different types of assets, not just cryptocurrencies. This could create significant uncertainty in the cryptocurrency industry and could lead to a more restrictive regulatory environment, which could potentially lead to the United States falling behind in this new technology to other countries that have embraced it.
3 Ways Traditional Investors Can Gain Crypto Exposure
A growing number of people are interested in crypto investment, which means financial advisors need to understand the various ways to invest into cryptocurrency and crypto related strategies.
While the asset class is still new, especially when compared to the rest of traditional finance, there are a few different ways to invest into crypto and crypto companies.
Some of these investment strategies involve direct investment in cryptocurrency and require advisors and clients to undertake a series of new steps. Other strategies are available at traditional financial custodians and are more similar to ordinary investments.
Cryptocurrencies and tokens: Clients may express a desire to own cryptocurrency directly. Companies such as Coinbase, Kraken and KuCoin are crypto exchange platforms that anyone is able to use to purchase and trade crypto assets.
Hedge funds: Crypto hedge funds allow affluent investors to allocate to crypto in an outsourced method. These clients allow the hedge fund to be the asset manager rather than buying cryptocurrencies directly and managing a crypto portfolio themselves.
Publicly traded vehicles: Clients who wish to invest in the crypto asset class but do not wish to buy cryptocurrencies directly or use a new custodian or fund can consider publicly traded vehicles. These could include bitcoin futures ETFs, bitcoin trusts, crypto and blockchain companies and funds.
We are extending a special invitation to the Financial Advisor/ RIA Breakfast taking place on Friday, April 28 at Consensus 2023. Join us for a discussion addressing The Most Important Aspects of Digital Assets for Financial Advisors: Portfolio Risk Management and Custody, Retirement Options and Allocation. Space is limited so be sure to secure your spot today! Click here to apply.
The company now holds 140,000 bitcoin worth about $4 billion.
Congrats on making it this far! On occasion, we’ll give our loyal Crypto for Advisors readers the opportunity to claim DESK, our social token, which is a mechanism for returning the value of engagement to the users who create it.
Disclaimer: The information contained in this newsletter, and any information linked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. You should seek additional information regarding the merits and risks of investing in any cryptocurrency or digital assets.
