Regulation

Ripple High Court Still Wins Troubled Waters on Whether XRP Is a Security Deserving of Stricter Regulation

Published

5 months ago

28 June, 2024

Ripple's Brad Garlinghouse plans XRP, Solana (SOL), Cardano (ADA) ETFs

Ripple recently won a clear victory in terms of dollars and cents in a securities class action lawsuit, with the judge dismissing most of the case.

But the judge also muddied the waters on a broader issue, departing from a high-profile decision Last year, judges suggested that Ripple’s XRP could be a security, thus deserving of stricter regulation. The conflicting rulings from two judges – one calling XRP a security, the other saying it is not – are a symptom of a larger problem: the lack of legal and regulatory clarity for the industry of cryptography in the United States. Until this clarity is granted, either by Congress or a higher court ruling, there will likely be more confusion for projects like Ripple and beyond.

On June 20, Judge Phyllis Hamilton of the U.S. District Court for the Northern District of California dismissed most of the class-action lawsuits facing Ripple. She allowed only one state lawsuit against the crypto company and its CEO, Brad Garlinghouse, to go to trial.

The remaining claim – that in a 2017 interview Garlinghouse made “misleading statements” in connection with the sale of the XRP token, which the plaintiffs claimed were securities – is worth just $174, from small potatoes for a business. estimated at $11 billion.

This result is objectively a huge victory for Ripple, something celebrated by the companyThe two groups certified in the lawsuit included all investors who purchased XRP over a six-year period and held it or sold it at a loss. By dismissing all class action claims, the California judge overseeing the case protected Ripple from potentially paying huge damages.

But there was a problem: In his ruling, Hamilton suggested that XRP might, in fact, be a security — breaking with the opinion of District Judge Analisa Torres of the Southern District of New York, who ruled last year in a separate case brought by the U.S. Securities and Exchange Commission that XRP was merely a security when sold to institutional investors.

Torres’ decision was widely hailed as a step toward regulatory clarity for the crypto industry, as well as a potential precedent for other crypto securities cases. Hamilton’s decision doesn’t overturn Torres’ decision — as Ripple executives have pointed out — but she is the second district judge to more or less disagree with Torres’ assessment of XRP.

By disagreeing with Torres, Hamilton has potentially provided ammunition in the form of another alternative precedent for those who believe XRP — and other cryptocurrencies — are securities, crypto lawyers say.

If this all sounds confusing, that’s because it is – even to crypto lawyers.

Hamilton’s decision to dismiss the class action lawsuits was based on statute of limitations grounds and had nothing to do with whether or not Hamilton believed XRP could be a security.

“The court found that some of these claims were time-barred and others did not raise a justifiable issue,” Joseph Castelluccio, a partner at global law firm Mayer Brown and co-leader of the firm’s fintech and blockchain practice groups, said in an email. “In other words, the decisions in favor of Ripple were not based on the idea that XRP is not a security, which has been the central argument made by Ripple and two of its executives in the ongoing cases.”

For the only claim it allowed to proceed to trial, Hamilton applied the Howey test – a pillar of US regulation based on a Supreme Court decision, used to determine whether an asset is a security or not – to XRP and found that it failed on the third prong, writing: “The [court] “I cannot conclude, as a matter of law, that Ripple’s conduct would not have led a reasonable investor to have an expectation of profit from the efforts of others.”

This means, according to crypto lawyers, that we still don’t know for sure whether XRP is a security or not.

“In short, the door is not closed on whether XRP can have security status, at least with respect to this ancillary cause of action,” explained Moish Peltz, a partner at New York law firm Falcon, Rappaport and Berkman.

Ripple executives said Hamilton’s decision does not overturn Torres’ 2023 ruling that XRP is not a security under federal law.

“In the SEC case, Judge Torres ruled that, under federal law, XRP is not per se a security,” Ripple’s chief legal officer Stu Alderoty said in an emailed statement. “That decision remains unchanged and can no longer be challenged in Judge Hamilton’s court.”

It is true that Hamilton’s decision does not in itself call into question Torres’ decision – although the SEC is likely to appeal its decision against Ripple and could potentially use Hamilton’s decision as an alternative precedent. Hamilton is also not the first judge to break with Torres. Another SDNY judge, Jed Rakoff, explicitly dissented from Torres’ ruling in a separate case, SEC vs. Terraform Labs.

But, perhaps more importantly, the divergent decisions emphasize that district courts are not obligated to agree with each other. Although they are free to draw on the decisions of other courts, they are not obligated to do so until a decision is made by a higher court, such as an appeals court or the Supreme Court.

Attorneys interviewed for this article agreed that the district court was divided on whether or not XRP could be a security when sold on an exchange, which was a symptom of a much larger problem: the general lack of legal and regulatory clarity on whether a given crypto asset constitutes a security. .

“It’s actually very difficult to say what the law is in this area,” said Jason Gottlieb, a partner at New York law firm Morrison Cohen and chair of the firm’s digital assets practice.

“In [Ripple’s] “In this case, when we look at the different district court opinions, they not only come to different results, but they come to different ways of getting to those results,” Gottlieb added. “I think there’s a lot of uncertainty when you try to take these district court cases and pit them against each other.”

Gottlieb added that since judges come to different conclusions, it is clear that the law is not well developed when it comes to cryptocurrencies.

“Many district courts will reach different conclusions, and even if they reach the same conclusions, they might arrive there for different reasons,” he said. “Until all of these cases have gone to the courts of appeal and ultimately to the Supreme Court, it is unlikely that we will have much clarity on the law in this area.”

But while district court decisions aren’t necessarily binding, they can serve as useful precedent in an industry like crypto, where the law is still being developed.

After Hamilton issued his ruling, SEC attorneys entered the decision into the docket as a supplemental authority notice – a way for attorneys to call attention to relevant legal issues in other cases – in their case against Binance, the world’s largest cryptocurrency exchange, in Washington, DC

Longo did not place much stock in the SEC’s decision to file Hamilton’s ruling in the Binance case, but said it has become a common practice in the crypto industry that parties in litigation issues supplemental authority notices when there is a potentially relevant decision. In another case.

“It’s part of the reality that a lot of the law here was essentially forged in the context of our trial courts,” Longo said. “This is where the case law came into play. There have been no new regulations or new laws. …I think it’s a symptom of the way the law has evolved here that often any trial court decision on the question of Howey in the context of a cryptocurrency case is frequently cited by other courts which have decisions on these kinds of questions before them. »

Without regulatory clarity from Congress, the crypto industry has no choice but to seek answers in the legal system — a process that Longo and other lawyers say is costly and time-consuming .

“The courts are trying to solve the problems of ‘neuromancers’ at a ‘dark’ pace,” Gottlieb joked.

“The case concerns a [initial coin offering, or ICO] “This happened in 2014. Ten years later, we are still handling some of these cases,” Gottlieb added. “We have issues going on today that we will still have to deal with in five or 10 years in the district courts – and that’s not counting the results of the appeals courts or the Supreme Court. »

The lawyers agreed that the chances of the Ripple case in California actually going to trial are slim to none, because the damages the plaintiff can recover are very small.

“Very often these cases don’t make it to court,” Gottlieb said, adding that in cases where the damages are small, both parties are incentivized to settle the issue amicably.

“Neither side is going to want to go to court and spend a million dollars in attorney fees beyond a few hundred dollars,” Gottlieb said. “If there is an offer of compromise or an offer to settle, that increases the pressure on the plaintiff to settle. … It’s difficult to see this matter going any further.”

The plaintiff’s attorneys did not respond to CoinDesk’s request for comment.

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Regulation

Crypto community gets involved in anti-government protests in Nigeria

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Crypto Community Engages in Nigeria's Governance Protests

Amid the #EndBadGovernanceInNigeria protests in Nigeria, a notable shift is occurring within the country’s cryptocurrency sector. As the general public demands sweeping governance reforms, crypto community leaders are seizing the opportunity to advocate for specific regulatory changes.

Rume Ophi, former secretary of the Blockchain Stakeholders Association of Nigeria (SiBAN), stressed the critical need to integrate crypto-focused demands into the broader agenda of the protests.

Ophi explained the dual benefit of such requirements, noting that proper regulation can spur substantial economic growth by attracting investors and creating job opportunities. Ophi noted, “Including calls for favorable crypto regulations is not just about the crypto community; it’s about leveraging these technologies to foster broader economic prosperity.”

Existing government efforts

In opposition to Ophi’s call for action, Chimezie Chuta, chair of the National Blockchain Policy Steering Committee, presents a different view. He pointed out The Nigerian government continued efforts to nurture the blockchain and cryptocurrency industries.

According to Chuta, the creation of a steering committee was essential to effectively address the needs of the crypto community.

Chuta also highlighted the creation of a subcommittee to harmonize regulations for virtual asset service providers (VASPs). With the aim of streamlining operations and providing clear regulatory direction, the initiative involves cooperation with major organizations including the Securities and Exchange Commission (SEC) and the Central Bank of Nigeria (CBN). “Our efforts should mitigate the need for protest as substantial progress is being made to address the needs of the crypto industry,” Chuta said.

A united call for support

The ongoing dialogue between the crypto community and government agencies reflects a complex landscape of negotiations and demands for progress.

While actors like Ophi are calling for more direct action and the inclusion of crypto demands in protest agendas, government figures like Chuta are advocating for recognition of the steps already taken.

As protests continue, the crypto community’s push for regulatory reform highlights a crucial aspect of Nigeria’s broader fight to improve governance and economic policies. Both sides agree that favorable regulations are critical to the successful adoption and implementation of blockchain technologies, signaling a potentially transformative era for Nigeria’s economic framework.

Read also : OKX Exchange Exits Nigerian Market Amid Regulatory Crackdown

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Regulation

Cryptocurrency Regulations in Slovenia 2024

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Cryptocurrency Regulations in Slovenia 2024

Slovenia, a small but highly developed European country with a population of 2.1 million, boasts a rich industrial history that has contributed greatly to its strong economy. As the most economically developed Slavic nation, Slovenia has grown steadily since adopting the euro in 2007. Its openness to innovation has been a key factor in its success in the industrial sector, making it a prime destination for cryptocurrency enthusiasts. Many believe that Slovenia is poised to become a powerful fintech hub in Europe. But does its current regulatory framework for cryptocurrencies support such aspirations?

Let’s explore Slovenia’s cryptocurrency regulations and see if they can propel the country to the forefront of the cryptocurrency landscape. My expectations are positive. What are yours? Before we answer, let’s dig a little deeper.

1. Cryptocurrency regulation in Slovenia: an overview

Slovenia is renowned for its innovation-friendly stance, providing a supportive environment for emerging technologies such as blockchain and cryptocurrencies. Under the Payment Services and Systems Act, cryptocurrencies are classified as virtual assets rather than financial or monetary instruments.

The regulation of the cryptocurrency sector in Slovenia is decentralized. Different authorities manage different aspects of the ecosystem. For example, the Bank of Slovenia and the Securities Market Agency oversee cryptocurrency transactions to ensure compliance with financial laws, including anti-money laundering (AML) and terrorist financing regulations. The Slovenian Act on the Prevention of Money Laundering and Terrorist Financing (ZPPDFT-2) incorporates the EU’s 5th Anti-Money Laundering Directive (5MLD) and aligns with the latest FATF recommendations. All virtual currency service providers must register with the Office of the Republic of Slovenia.

2. Cryptocurrency regulation in Slovenia: what’s new?

Several notable developments have taken place this year in the cryptocurrency sector in Slovenia:

July 25, 2024:Slovenia has issued a €30 million on-chain digital sovereign bond, the first of its kind in the EU, with a yield of 3.65%, maturing on 25 November 2024.

May 14, 2024:NiceHash has announced the first Slovenian Bitcoin-focused conference, NiceHashX, scheduled for November 8-9 in Maribor.

3. Explanation of the tax framework for cryptocurrencies in Slovenia

The Slovenian cryptocurrency tax framework provides clear guidelines for individuals and businesses. According to the Slovenian Financial Administration, the tax treatment depends on the status of the trader and the nature of the transaction.

People:Income earned from cryptocurrencies through employment or ongoing business activities is subject to personal income tax. However, capital gains from transactions or market fluctuations are exempt from tax.
Companies:Capital gains from cryptocurrency-related activities are subject to a 19% corporate tax. Value-added tax (VAT) generally applies at a rate of 22%, although cryptocurrency transactions that are considered as means of payment are exempt from VAT. Companies are not allowed to limit payment methods to cryptocurrencies alone. Tokens issued during ICOs must follow standard accounting rules and corporate tax law.

4. Cryptocurrency Mining in Slovenia: What You Need to Know

Cryptocurrency mining is not restricted in Slovenia, but income from mining is considered business income and is therefore taxable. This includes rewards from validating transactions and any additional income from mining operations. Both individuals and legal entities must comply with Slovenian tax regulations.

5. Timeline of the development of cryptocurrency regulation in Slovenia

Here is a timeline highlighting the evolution of cryptocurrency regulations in Slovenia:

2013:The Slovenian Financial Administration has issued guidelines stating that income from cryptocurrency transactions should be taxed.
2017:The Slovenian Financial Administration has provided more detailed guidelines on cryptocurrency taxation, depending on factors such as the status of the trader and the type of transaction.
2023:The EU adopted the Markets in Crypto-Assets (MiCA) Regulation, establishing a uniform regulatory framework for crypto-assets, their issuers and service providers across the EU.

Endnote

Slovenia’s approach to the cryptocurrency sector is commendable, reflecting its optimistic view of the future of cryptocurrencies. The country’s balanced regulatory framework supports cryptocurrency innovation while protecting users’ rights and preventing illegal activities. Recent developments demonstrate Slovenia’s commitment to continually improving its regulatory environment. Slovenia’s cryptocurrency regulatory framework sets a positive example for other nations navigating the evolving cryptocurrency landscape.

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Regulation

A Blank Sheet for Cryptocurrencies: Kamala Harris’ Regulatory Opportunity

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

A Blank Sheet for Cryptocurrencies: Kamala Harris' Regulatory Opportunity

photo by Shubham Dhage on Unsplash

As the cryptocurrency landscape continues to evolve, the need for clear regulation has never been more pressing.

With Vice President Kamala Harris now leading the charge on digital asset regulation in the United States, this represents a unique opportunity to start fresh. This fresh start can foster innovation and protect consumers. It can also pave the way for widespread adoption across industries, including real estate agencies, healthcare providers, and online gaming platforms like these. online casinos ukAccording to experts at SafestCasinoSites, these platforms come with benefits such as bonus offers, a wide selection of games, and various payment methods. Ultimately, all this increase in adoption could propel the cryptocurrency market forward.

With this in mind, let’s look at the current state of cryptocurrency regulation in the United States, a complex and confusing landscape. Multiple agencies, including the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Financial Crimes Enforcement Network (FinCEN), have overlapping jurisdictions, creating a fragmented regulatory environment. This lack of clarity has stifled innovation as companies are reluctant to invest in the United States, fearing regulatory repercussions. A coherent and clear regulatory framework is urgently needed to realize the full potential of cryptocurrencies in the United States.

While the US struggles to find its footing, other countries, such as Singapore and the UK, are actively looking into the cryptocurrency sector by adopting clear and supportive regulatory frameworks. This has led to a brain drain, with companies choosing to locate in more conducive environments.

Vice President Kamala Harris has a unique opportunity to change that narrative and start over. Regulation of cryptocurrencies. By taking a comprehensive and inclusive approach, it can help create a framework that balances consumer protection with innovation and growth. The time has come for clear and effective regulation of cryptocurrencies in the United States.

Effective regulation of digital assets is essential to foster a safe and innovative environment. The key principles guiding this regulation are clarity, innovation, global cooperation, consumer protection, and flexibility. Clear definitions and guidelines eliminate ambiguity while encouraging experimentation and development to ensure progress. Collaboration with international partners establishes consistent standards, preventing regulatory arbitrage. Strong safeguards protect consumers from fraud and market abuse, and adaptability allows for evolution in response to emerging trends and technologies, striking a balance between innovation and protection.

The benefits of effective cryptocurrency regulation are multiple and far-reaching. By establishing clear guidelines, governments can attract investors and mainstream users, driving growth and adoption. This can, in turn, position countries like the United States as global leaders in fintech and innovation. Strong safeguards will also increase consumer confidence in digital assets and related products, increasing economic activity.

A thriving crypto industry can contribute significantly to GDP and job creation, which has a positive impact on the overall economy. Furthermore, effective regulation has paved the way for the growth of many businesses such as tech startups, online casinos, and pharmaceutical companies, demonstrating that clear guidelines can open up new opportunities without stifling innovation. This is a great example of how regulation can allay fears of regressive policies, even if Kamala Harris does not repeal the current progressive approach. By adopting effective regulation, governments can create fertile ground for the crypto industry to thrive, thereby promoting progress and prosperity.

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Regulation

South Korea Imposes New ‘Monitoring’ Fees on Cryptocurrency Exchanges

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

South Korea Imposes New 'Monitoring' Fees on Cryptocurrency Exchanges

Big news! The latest regulatory changes in South Korea are expected to impact major cryptocurrency exchanges like Upbit and Bithumb. Under the updated regulations, these platforms will now have to pay monitoring fees, which could cause problems for some exchanges.

Overview of new fees

In the latest move to regulate cryptocurrencies, the Financial Services Commission announced on July 1 the revised “Enforcement Order of the Act on the Establishment of the Financial Services Commission, etc.” update “Regulations on the collection of contributions from financial institutions, etc.” According to local legislation newsThe regulations require virtual asset operators to pay supervisory fees for inspections conducted by the Financial Supervisory Service starting next year. The total fees for the four major exchanges are estimated at around 300 million won, or about $220,000.

Apportionment of costs

Upbit, which holds a dominant market share, is expected to bear more than 90% of the total fee, or about 272 million won ($199,592) based on its operating revenue. Bithumb will pay about 21.14 million won ($155,157), while Coinone and GOPAX will contribute about 6.03 million won ($4,422) and 830,000 won ($608), respectively. Korbit is excluded from this fee due to its lower operating revenue.

Impact on the industry

The supervision fee will function similarly to a quasi-tax for financial institutions subject to inspections by the Financial Supervisory Service. The new law requires any company with a turnover of 3 billion won or more to pay the fee.

In the past, fees for electronic financial companies and P2P investment firms were phased in over three years. However, the taxation of virtual asset operators has been accelerated, reflecting the rapid growth of the cryptocurrency market and increasing regulatory scrutiny.

Industry reactions

The rapid introduction of the fee was unexpected by some industry players, who had expected a delay. Financial Supervisory Service officials justified the decision by citing the creation of the body concerned and the costs already incurred.

While larger exchanges like Upbit and Bithumb can afford the cost, smaller exchanges like Coinone and GOPAX, which are currently operating at a loss, could face an additional financial burden. This is part of a broader trend of declining trading volumes for South Korean exchanges, which have seen a 30% drop since the new law went into effect.

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