Last week was eventful for Gemini. They faced similar accusations brought by the United States Securities and Exchange Commission (SEC) as Ripple. Subsequently, they had to deal with various operational and regulatory challenges.
Despite the ongoing SEC case, Ripple is still determined to pursue growth. In Asia, more robust regulations on crypto are being implemented, but industry leaders remain dissatisfied with the SECโs actions in the United States.
Gemini challenges the SEC
Gemini, a crypto exchange, has challenged the allegations made by the SEC that its Earn product offered unregistered securities. This move is similar to Rippleโs legal battle with the watchdog and could lead to a prolonged dispute.
On May 26, Geminiย launchedย a strong counterattack against the SECโs lawsuit. Gemini and its partner Genesis, a bankrupt crypto lender, are ready to fight the legal battle against the SEC. They strongly disagree with the SECโs claims and believe that their Earn product should not be considered a security. They request the court dismiss the SECโs lawsuit, which seeks disgorgement and a permanent injunction.
Philippines issues warning, Gemini expands
As Gemini geared up to battle the SEC, it faced potential setbacks in the Philippines. This week, the Philippines regulatorย issuedย a warning advising its citizens against investing in the Gemini Foundation. The exchange recently launched a derivatives platform, but the SEC has cautioned against it. The watchdog has highlighted that Gemini requires a license or authorization from the regulator. Moreover, they warned that investing in unregistered derivatives could result in legal and financial risks for investors.
This setback came up amid recent expansion plans set up by Cameron and Tyler Winklevoss, the founders of Gemini.ย Reportsย on May 24 suggested that the Winklevoss twins want to expand their business to the United Kingdom. They engaged with representatives from the Financial Conduct Authority (FCA) and the Bank of England (BoE) to understand the regulatory environment and market opportunities.
The twins expressed discontent with the regulations hindering their growth opportunities in the United States. Despite this, they are determined to remain in their home country. They are considering the United Kingdom as a potential option for expanding further.
In another effort at expansion, Geminiย decidedย to establish its European hub in Dublin, Ireland. The decision to expand to Ireland aims to avoid the uncertainties of United States regulations and take advantage of Irelandโs supportive tech ecosystem and clear rules.ย
On Twitter, the founders announced their intentions to maintain a balance between innovation and regulation in the cryptocurrency sector. Although there have been some regulatory challenges, Ireland is considered a welcoming environment for cryptocurrency. As a result, major crypto companies and exchanges, such as Binance and Kraken, have expanded.
The Ripple vs. SEC case
Currently, Ripple is defending itself against the SECโs lawsuit. Both sides are planning to submit their cross-motions for summary judgments next month. As a result, the crypto community has been discussing the case in light of recent developments.ย
This week, attorneys Jesse Hynes and Bill Morganย sharedย their thoughts on the case regarding XRP, a cryptocurrency. They hoped the court would rule in favor of XRP not being classified as a security. They believe the court should consider the changes in the nature and timing of XRP sales over time. Additionally, they suggested that Rippleโs use of XRP for its on-demand liquidity (ODL) service could support the argument that XRP is not a security.
On the other hand, some lawyers are suggesting that Rippleโs legal battle with the SEC could be influenced by the result of a similar case involving LBRY, a platform that has its token, LBC. LBRY is locked in a dispute with the SEC regarding its classification as a security in the secondary market. The platformโs goal is to contest the penalties imposed by the SEC and prove that LBC is not a security.
These attorneys suggested that the LBRY case could have implications for Ripple and XRP, as the SEC might try to impose a vague and broad injunction against them โ a move observed with the LBRY case.
As the litigation lingers, Kylie Chiseul Kim, a defense attorney for Ripple Labs in its lawsuit with the SEC,ย filedย a motion to withdraw from the case. Kim, who was part of the law firm representing Ripple in a legal battle, is leaving for professional reasons. Ripple will still be represented by other lawyers, and users donโt think her departure will affect the caseโs outcome.
XRPL decentralization debate
Despite the ongoing legal dispute, certain Ripple executives have been refuting allegations that the XRP Ledger is centralized and operated by the technology company based in San Francisco. Recently, David Schwartz, the chief technology officer (CTO) of Ripple and one of the creators of the XRPL,ย defendedย the blockchainโs decentralization against these claims.
He explained that the XRP Ledger Foundation, which provides a list of trusted nodes for the ledger, does not have the power to impose its decisions on the network. He also said that the validators on the ledger do not have any control or incentives to manipulate the network.ย
Schwartz further argued that the XRPL is designed to allow flexibility and choice for its users and that there are no major disputes over its governance.
Ripple acquires stake in Bitstamp
On May 24, Rippleย acquiredย a minority stake in Bitstamp, a crypto exchange. Pantera Capital, a crypto investment firm, previously owned the stake.ย
Galaxy Digitalโs chief investment officer (CIO) confirmed the acquisition in their quarterly report.ย
The purpose of the deal remains unclear. However, it may be related to Rippleโs plans for expansion or Panteraโs desire to cash in on profits.
US regulators criticized
In the United States, industry leaders have expressed frustration with the current state of crypto regulations, particularly regarding the SECโs enforcement actions. Coinbase has beenย advocatingย for improved laws.
Coinbase believes that blockchain technology boasts a lot of societal and economic benefits. The exchange stressed that it wants clear and comprehensive rules that protect consumers and foster innovation in the crypto industry. The company is willing to work with lawmakers and regulators to create these rules and standards.
On May 23, billionaire investor Mark Cubanย commentedย on the SECโs attempts to regulate crypto tokens by declaring them as securities. Cuban stressed that the SECโs approach of sending letters to third parties without consulting the token issuers is unfair and ineffective.ย
He suggested that token issuers dissolve their entities and use decentralized finance (DeFi) to trade their tokens, making them immune to the SECโs actions.ย
Bob Ras, the co-founder of Sologenic, also expressed his thoughts regarding SECโs enforcements. Heย criticizedย the crypto regulatory approach of the watchdog, arguing that they should recognize the unique characteristics and benefits of these innovative technologies. Labeling most of them as securities is inaccurate and could hinder innovation and the United Statesโ position in the global market.
Ras pointed to the Ripple case as a demonstration of the SECโs faulty method and urged for a more useful and adaptable regulatory framework that acknowledges the unique features and benefits of crypto-assets. He warned that the SECโs current tactic may harm the agencyโs credibility.
Unbanked folds
This week, Unbanked, a company that provides crypto custody and payment services, had to shut down due to regulatory obstacles. The firmย announcedย that it was shutting down due to the unfavorable regulatory environment in the United States. Its founders claim they tried to comply but encountered numerous challenges and expenses.
Unbankedโs closure was unexpected, especially after its partnerships with major corporations like Mastercard. However, the company could not obtain the $5m investment necessary for its growth and survival.ย
Crypto regulations in Asia
Despite ongoing critique from industry leaders about the United Statesโ uncertain regulatory environment, Asia remains committed to strengthening its regulatory efforts.
Hong Kongโs financial regulator, the SFC, willย launchย a new framework for crypto exchanges and retail traders on June 1, 2023. This framework will enable retail investors to access regulated platforms for crypto assets such as bitcoin (BTC) and ethereum (ETH). It will also provide measures to protect investors. The SFC stated that most respondents who participated in the consultation agreed with the proposal.
Lawmakers in South Korea have unanimouslyย approvedย a new bill that requires public officials and candidates to disclose their cryptocurrency holdings. The bill will take effect in 2024 and amends the Public Service Ethics Act, which previously did not include cryptocurrencies and other virtual assets.
The bill aims to enhance transparency and accountability within the public sector. Additionally, it puts a cap on investments officials in the cryptocurrency sector can make to prevent potential conflicts of interest.
Will China change its stance on crypto?
China, a nation famously unsupportive of cryptocurrencies and associated operations, may be changing its perspective on crypto. Keyur Rohit shared this information on Twitter.
Rohitย citedย a report by Chinaโs Central Television network that Hong Kong is now allowing retail investors to buy bitcoin (BTC) as a possible sign of Chinaโs changing attitude.ย
The global crypto market could rise if China decides to lift its ban on digital assets. China is one of the worldโs largest economies.
