It's no secret that cryptocurrency and related decentralized finance assets are becoming popular. Following moves by companies like Microstrategy, and rumors around big players like Elon Musk and Warren Buffett (or at least some of his proxies), different types of coins and tokens are eliciting new interest from institutional investors, as well as the "man on the street." Companies are thinking about holding treasury funds in crypto instead of fiat, partly to get around the effect of wrangling by the US Federal Reserve. In short, it’s a bold new world where people, including the unbanked, those pursuing flag theory, or entrepreneurs looking to create, have options.
However, as we look at the big picture in cryptocurrency, we see that some parts of this sector are really a regulatory minefield. And we also see that when things go wrong, it's sometimes rather hard to put them right.
Ripple and the SEC
One of the most prominent examples is the legal quandary now faced by Ripple, a chain with a $22 billion market cap that works with the XRP token, which is getting delisted by some exchanges based on current legal challenges from the SEC. That’s a big deal for an organization that big!
If you're wondering exactly why the SEC is going after Ripple, the terminology is going to be important. Different reports use different wording – although some describe the SEC's claim as surrounding Ripple’s use of an "unlicensed security," direct wording from the SEC talks about an "unregistered security" and ongoing work with a "digital asset security offering" that the SEC says is, essentially, illegitimate.
Also, oddly, the SEC is not applying violations to the entire volume of XRP traded, but to about $1.3 billion that it says was doled out for work done by Ripple employees and contractors, or otherwise changed hands in a way that apparently violates US regulations.
In terms of the timeline, the SEC’s beef with Ripple casts a wide net, from 2013 to the present. Ripple, for its part, flatly denies that it violated regulations, and contends that XRP is not a security, but a securitized token. But despite positive-sounding tweets by Brad Garlinghouse, it doesn’t seem likely that Ripple and the SEC are going to see eye to eye anytime soon.
XRP also gets important ballast from none other than Christopher Giancarlo, formerly of the CFTC. According to reports, Giancarlo supports XRP's claim saying that XRP is not a security. However, that's very much at odds with what SEC is currently arguing in court as both parties go to a preliminary hearing on February 22.
The bottom line is that investors don't want to get caught in this kind of fray. It remains to be seen how this conflict is going to play out. Meanwhile, though, investors can go to other ecosystems that are fully compliant and actively blessed by the edicts of regulators. Then they can rest easier as they scan the morning’s headlines and see the likes of Arthur Hayes or other notables being "handled" by investigators.
CoinZoom and US Regulation
For an exchange that handles many cryptocurrency pairs confidently, interested investors can hop over to places like CoinZoom, where a strategic platform offers global remittances, cryptocurrency on-ramps and more through a completely regulated environment. CoinZoom is a licensed MSB in all 50 states and has other key compliance in hand. The difference between parties like CoinZoom and the likes of Ripple, BitMEX or OKEx, is that when the private enterprise people proactively work in the regulatory framework and ask the right questions, instead of waiting to get hammered by the SEC or some other agency, good things happen.