Regulation

Ripple’s big court victory has however muddied the waters on whether XRP is a security worthy of stricter regulation.

Published

5 months ago

2 July, 2024

Ripple's big court victory has however muddied the waters on whether XRP is a security worthy of stricter regulation.

Ripple’s win in California muddies the waters on whether XRP can be considered a security, cryptocurrency lawyers say.
District court judges are not required to accept the judgments of their colleagues in other cases.
Lawyers say the lack of legal certainty for XRP and other digital assets will likely continue until there is a ruling from a higher court or regulatory certainty granted by Congress.

Ripple recently scored a clear financial victory in a securities class action lawsuit, with the judge dismissing most of the case.

But the judge also muddied the waters on a larger issue, departing from a high profile decision last year, suggesting that Ripple’s XRP might be a stock, and therefore worthy of more stringent regulation. The conflicting rulings by two judges are a symptom of a larger problem: the lack of legal and regulatory clarity for the cryptocurrency industry in the United States. Until that clarity is provided, whether by Congress or a higher court ruling, there will likely be more confusion for projects like Ripple and beyond.

ON June 20thJudge Phyllis Hamilton of the U.S. District Court for the Northern District of California has dismissed most of a class action lawsuit filed by Ripple. She allowed only one individual state law claim against the cryptocurrency company and its CEO Brad Garlinghouse to proceed to trial.

The remaining claim — that, during a 2017 interview, Garlinghouse made “misleading statements” in connection with the sale of the XRP token, which the plaintiffs allege were securities — is worth just $174, a pittance for a company estimated at $11 billion.

This result is objectively a great victory for Ripple, something celebrated by the company. The two classes filed in the lawsuit included all investors who had purchased XRP over a six-year period and held or sold it at a loss. In dismissing all class-action claims, the California judge overseeing the case protected Ripple from potentially paying out massive damages.

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

Torres’ ruling has been widely celebrated as a step toward regulatory clarity for the cryptocurrency industry, as well as a potential precedent for other cryptocurrency securities cases. Hamilton’s ruling doesn’t overturn Torres’s ruling, as Ripple executives have pointed out, but it is the second district judge to more or less disagree with Torres’s assessment of XRP.

The story continues

In his disagreement with Torres, Hamilton has potentially provided ammunition in the form of yet another alternative precedent for those who believe that XRP (and other cryptocurrencies) are securities, according to cryptocurrency lawyers.

If this all seems confusing, that’s because it is, even for cryptocurrency lawyers.

A partial victory

Hamilton’s decision to dismiss the class action claims 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 failed to raise a triable 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 rulings in favor of Ripple were not based on the view that XRP is not a security, which has been the central argument advanced by Ripple and two of its executives in the ongoing cases.”

For the only claim that allowed for a trial, Hamilton applied the Howey test, a cornerstone of U.S. regulation based on a Supreme Court ruling used to determine whether an asset is a security or not, to XRP and found that it failed the third prong, writing: “The [court] cannot hold, as a matter of law, that Ripple’s conduct would not have induced a reasonable investor to expect a profit from the efforts of others.”

This means, according to cryptocurrency experts, 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 as it relates to this ancillary cause of action,” explained Moish Peltz, a partner at the New York law firm Falcon, Rappaport & Berkman.

Disagreements between district courts

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

“In the SEC case, Judge Torres ruled that XRP is not a per se security under federal law,” Ripple Chief Legal Officer Stu Alderoty said in an emailed statement. “That ruling stands and cannot be challenged in Judge Hamilton’s courtroom.”

It’s true that Hamilton’s ruling doesn’t challenge Torres’s ruling per se, though the SEC will likely appeal its case against Ripple and could potentially use Hamilton’s ruling as an alternative precedent. Hamilton isn’t the first judge to break with Torres. Another SDNY judge, Jed Rakoff, explicitly disagreed with Torres’s ruling in a separate case, SEC v. Terraform Labs.

But perhaps more importantly, the differing decisions underscore that district courts don’t have to agree with each other. While they are free to draw on the decisions of other courts, they are not required to do so until a higher court, such as an appellate court or the Supreme Court, issues a decision.

A continuing lack of clarity

Lawyers interviewed for this article agree that the district court’s split on whether XRP can be considered a security when sold on an exchange is symptomatic of a much larger problem: a general lack of legal and regulatory clarity about whether or not a given cryptocurrency is a security.

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

“In [Ripple’s] case, when we look at different opinions from different district courts, they have not only different results, but 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 reach different conclusions, it is clear that the law is not well developed when it comes to cryptocurrencies.

“There are going to be a lot of district courts that come to different conclusions, and even when they come to the same conclusions, they may come to them for different reasons,” he said. “Until all these cases get to the appellate courts and ultimately the Supreme Court, we’re unlikely to have much clarity on the law in this area.”

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

After Hamilton issued his ruling, SEC lawyers filed the decision on the docket as a supplemental notice of cause, a way for the lawyers to draw attention to legal issues relevant in other cases, including their case against Binance, the world’s largest cryptocurrency exchange, in Washington, D.C.

Longo didn’t give much weight to the SEC’s decision to dismiss Hamilton’s ruling in the Binance case, but he said it’s become common practice in the cryptocurrency industry for litigants to issue supplemental notices when there’s a potentially relevant decision in another case.

“It’s part of the reality that a lot of the law here was basically shaped in the context of our lower courts,” Longo said. “That’s where the case law developed. There was no new regulation or statute. … I think it’s a symptom of the way the law has evolved here that, oftentimes, any lower court decision on the Howey issue in the context of a cryptocurrency case is often cited in other courts that have decisions on those kinds of issues before them.”

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

“The courts are trying to resolve the issues of ‘Neuromancer’ at the same rate as ‘Bleak House,’” Gottlieb joked.

“The case concerns a [initial coin offering, or ICO] “That happened in 2014. So 10 years later, we’re dealing with some of these cases,” Gottlieb added. “We have issues going on today that we’re still going to be dealing with in the district courts five, 10 years from now, and that’s not even counting when we see the results from the appellate courts or the Supreme Court.”

A small attempt at a process

Lawyers agreed that the chances of Ripple’s California case actually going to trial are slim to none, because the damages the plaintiff can recover are so small.

“Very often, these cases don’t go to trial,” Gottlieb said, adding that in cases where the damages are small, both parties are incentivized to settle out of court.

“Neither side is going to want to go to trial and spend a million dollars in attorneys’ fees instead of a few hundred dollars,” Gottlieb said. “If there’s a compromise offer or a settlement offer, that increases the pressure on the plaintiff to settle. … It’s hard to see this case going any further.”

Lawyers for the actor did not respond to CoinDesk’s request for comment.

Correction (June 28, 2024, 10:00 p.m.): He clarifies a nuance in the second paragraph about how Judge Phyllis Hamilton described XRP transactions in the context of the case she is overseeing.

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Regulation

Cryptocurrency Regulation in Slovenia 2024

Published

4 months ago

1 August, 2024

Chain Feed Staff

Cryptocurrency Regulation 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 significantly to its robust 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 favorite destination for cryptocurrency enthusiasts. Many believe that Slovenia is poised to become a powerful fintech hub in Europe. But does its current cryptocurrency regulatory framework support such aspirations?

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

1. Cryptocurrency Regulation in Slovenia: An Overview

Slovenia is known for its pro-innovation 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.

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 supervise cryptocurrency transactions to ensure compliance with financial laws, including anti-money laundering (AML) and counter-terrorist financing regulations. The Slovenian Act on the Prevention of Money Laundering and Terrorist Financing (ZPPDFT-2) incorporates the EU’s Fifth 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?

This year, there have been several noteworthy developments in the cryptocurrency sector in Slovenia:

July 25, 2024: Slovenia has issued a €30 million on-chain sovereign digital 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 legal framework for cryptocurrency taxation in Slovenia

Slovenia’s cryptocurrency tax framework provides clear guidelines for both individuals and businesses. According to the Slovenian Tax Administration, tax treatment depends on the status of the trader and the nature of the transaction.

Individuals: Income earned from cryptocurrencies through employment or ongoing business activities is subject to personal income tax. However, capital gains from trading or market fluctuations are exempt from taxation.
Society: Capital gains from cryptocurrency activities are subject to a corporate income tax of 19%. Value added tax (VAT) generally applies at a rate of 22%, although cryptocurrency transactions considered as means of payment are exempt from VAT. Companies are not allowed to limit payment methods to cryptocurrencies only. Tokens issued during ICOs must comply with standard accounting rules and the Corporate Tax Act.

4. Cryptocurrency Mining in Slovenia: What You Should Know

Cryptocurrency mining is not restricted in Slovenia, but the 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 natural persons and legal entities must comply with Slovenian tax regulations.

5. Timeline of the evolution of cryptocurrency regulations in Slovenia

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

2013:The Slovenian Tax Administration has issued guidelines according to which income from cryptocurrency transactions should be taxed.
2017:The Slovenian Tax Administration has provided more detailed guidelines on cryptocurrency taxation, based on factors such as the trader’s status and the type of transaction.
2023The EU has adopted the Markets in Cryptocurrencies Regulation (MiCA), which establishes a uniform regulatory framework for cryptocurrencies, their issuers and service providers across the EU.

Final note

Slovenia’s approach to the cryptocurrency industry is commendable, reflecting its optimistic view of the future of cryptocurrency. The country’s balanced regulatory framework supports cryptocurrency innovation while protecting user rights and preventing illegal activities. Recent developments demonstrate Slovenia’s commitment to continuously 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 Slate for Cryptocurrencies: Kamala Harris’ Regulatory Opportunity

Published

4 months ago

1 August, 2024

Chain Feed Staff

A Blank Slate for Cryptocurrencies: Kamala Harris' Regulatory Opportunity

Photo by The Dhage of Shubham ON Disinfect

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

Vice President Kamala Harris is now leading the charge on digital asset regulation in the United States, presenting a unique opportunity for a clean slate. 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 gambling platforms like these online casinos in the uk. According to experts at SafestCasinoSites, these platforms have advantages such as bonus offers, a wide selection of games, and various payment methods. Ultimately, all this increased adoption could push the cryptocurrency market forward.

With that in mind, let’s take a look at the current state of cryptocurrency regulation in the United States, which is 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 hindered innovation, as companies are reluctant to invest in the United States, fearing regulatory repercussions. A cohesive and clear regulatory framework is urgently needed to unlock 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 embracing the cryptocurrency industry with clear and supportive regulatory frameworks. This has led to a brain drain, with companies opting to set up in more hospitable environments.

Vice President Kamala Harris has a unique opportunity to change this narrative and clean up the future. cryptocurrency regulation. 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 fostering a safe and innovative environment. Key principles guiding this regulation include 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 many and far-reaching. By establishing clear guidelines, governments can attract investors and traditional users, spurring growth and adoption. This, in turn, can position countries like the United States as global leaders in financial technology and innovation. Strong protections will also increase consumer confidence in digital assets and related products, boosting economic activity.

A thriving cryptocurrency industry can significantly contribute 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 companies such as tech startups, online casinos, and pharmaceutical companies, proving that clear guidelines can unlock new opportunities without stifling innovation. This is a great example of how regulation can alleviate 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 cryptocurrency industry to thrive, driving progress and prosperity.

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Regulation

Think You Own Your Crypto? New UK Law Would Ensure It – DL News

Published

4 months ago

1 August, 2024

Chain Feed Staff

Think You Own Your Crypto? New UK Law Would Ensure It – DL News

The UK Law Commission has developed a bill that will address a situation of legal uncertainty.
The commission’s goal is to ensure that cryptocurrencies are legally treated as personal property.

UK law is not entirely clear whether cryptocurrencies can be considered personal property.

This is according to the UK Law Commission, which argues that while most investors assume that when they buy cryptocurrencies, they are “acquiring property rights in the same way as buying, say, a watch or a laptop.”

“As the law currently stands, this is not necessarily the case,” the respected legal body said in a new report on Tuesday.

The report was accompanied by a solution: a new bill to consolidate the legal status of digital assets as personal property.

This could be huge for the estimated 4.7 million Britons valued hold cryptocurrencies.

“This will allow the courts to determine a range of issues,” the report says.

If passed, the law would help clarify how cryptocurrencies are treated in cases of bankruptcy, estate planning or theft.

Flexible law

The commission is an independent body responsible for reviewing UK law. It began investigating whether English and Welsh property laws apply to digital assets in 2020.

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At the time, then-Chancellor of the Exchequer Rishi Sunak expressed ambitions to transform the UK into a cryptocurrency hub as Britons invested more.

In 2023, the commission decided that, in most cases, the legislation of England and Wales is sufficiently flexible to regulate cryptocurrencies.

This means that any asset, from Bitcoin to non-fungible tokens and some types of digital contracts, can be considered personal property, without Parliament having to write extensive new laws.

There was one small area of uncertainty, however: it was unclear whether cryptocurrencies fell within the two categories of personal property recognised under UK law.

These two categories are made up of tangible assets (cars, laptops, bags) and intangible assets (contracts, stocks, and debt).

The bill that will now go to Parliament to be converted into law aims to remedy this situation.

Without that clarification, courts may try to lump cryptocurrencies together with intangible assets, said Adam Sanitt, head of litigation, knowledge, innovation and corporate support EMEA at law firm Norton Rose Fulbright. DL News in March.

This is problematic because intangible assets are creations of the legal system, while cryptocurrencies are not.

“How the law treats digital assets, what rights you have over them, how you own them, how you transfer them to other people—that treatment is different, because digital assets don’t exist by virtue of the legal system, but independently of it,” Sanitt said.

The money in your bank account, for example, is a legal creation. The government could pass a law to cancel it.

However, if the UK passed a law banning Bitcoin, Bitcoin would not cease to exist.

Sanitt said: “That’s why digital assets are so important: neither the government nor the legal system can take them away from you.”

Contact the author at joanna@dlnews.com.

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Regulation

The Solution the Cryptocurrency Industry Needs

Published

4 months ago

1 August, 2024

Chain Feed Staff

The Solution the Cryptocurrency Industry Needs

The cryptocurrency industry has performed remarkably well since its inception, but now faces a critical hurdle that requires careful consideration and regulatory expertise to overcome. Despite the industry’s rapid growth and rate of global adoption, the gap between the industry and global regulation is only widening as new innovations break through into the public domain.

Although efforts are being made on both sides, regulators’ lack of familiarity with cryptocurrencies and the industry’s lack of regulatory expertise are hindering innovation in the sector. To address this issue, traditional financial institutions (TradFi) such as MultiBank Group have started venturing into the cryptocurrency sector.

The regulatory gap

Over the past decade, the cryptocurrency industry has grown dramatically as tech entrepreneurs and forward-thinking thinkers have founded a plethora of crypto platforms and protocols to push the boundaries of the space. The problem faced by these newcomers, who are often unfamiliar with the hurdles posed by financial regulators, can quickly overwhelm and stall operations.

On the other hand, regulators more attuned to TradFi systems may be equally stifled by the complexities of decentralization and blockchain technology. The unfamiliarity experienced by both innovators and regulators creates a stark regulatory divide between both sides, leading to misunderstandings and potential conflicts.

To overcome this lack of communication, a bridge must be built to bridge the gap, ensuring future stability for the cryptocurrency industry and clearer legislation from regulators.

Efforts to bridge the gap between industry

The gap between the cryptocurrency industry and regulators is slowly narrowing as efforts to regulate cryptocurrencies and Web3 space activities are gaining momentum. Specific regulatory actions are taking place in many countries, aimed at providing greater oversight of cryptocurrency transactions, cryptocurrency exchanges, and initial coin offerings (ICOs).

Despite being a positive step in the right direction, these new regulations can differ significantly between jurisdictions around the world. This fragmentation results in a regulatory environment filled with obstacles, bottlenecks, and varying requirements and prohibitions. As cryptocurrency companies and TradFi institutions attempt to navigate the minefield, the regulatory maze becomes increasingly convoluted.

TradFi institutions like MultiBank Group are working to solve this problem, as one of the largest financial derivatives institutions in the world with over 12 licenses across all continents. Founded in 2005, the Group has an impeccable and trustworthy reputation globally, extensive expertise in financial regulation and has now ventured into the cryptocurrency space via MultiBank.io.

MultiBank.io: TradFi Excellence in the Crypto Space

Expanding into the cryptocurrency space via MultiBank.io has enabled MultiBank Group to provide regulatory clarity and trust to the digital asset industry. With a substantial daily trading volume of $12.1 billion, the timely decision to enter the cryptocurrency space has the potential to set regulatory precedents and standards for years to come.

By helping to develop sensible and well-considered regulations, MultiBank.io’s established reputation allows the company to communicate effectively and clearly with regulators. Unlike others in the industry without regulatory expertise, MultiBank.io facilitates the Group’s commitment to rigorous regulatory standards, the scope of oversight and establishes the necessary transparency.

The company’s approach ensures that regulatory licenses are pre-acquired, compliance is met globally without jurisdictional barriers, and transactions remain secure at all times. By helping to create robust regulations that are both clear and innovation-friendly, MultiBank Group looks forward to standardizing the entire cryptocurrency industry for other potential innovators.

One of the biggest challenges in establishing a clearly constructed bridge between regulators and the cryptocurrency industry is effective communication. By leveraging its institutional background TradFi and acting as an intermediary with regulators, MultiBank Group is able to translate the needs of the industry to those who shape it.

This quality of mediation is essential to ensure that regulation helps develop essential technological advances rather than hinders their establishment and growth. Through the lens of TradFi when looking at the complexity of the cryptocurrency industry, MultiBank Group is able to deconstruct unfamiliar crypto arguments for regulation and create a safer and more secure space.

Where TradFi and Crypto Meet

Regulations are crucial for traders, investors, and everyday users of crypto platforms and their safety when participating in crypto markets. While strict regulations are necessary for stable market integrity, innovation should still be considered, something MultiBank Group considers a priority.

Where TradFi and cryptocurrencies converge, the Group is there to provide a balanced approach to ensure promotion for both the cryptocurrency industry and regulators seeking to protect both retail and institutional investors. This balance is critical to maintaining a thriving space where cryptocurrency innovation can thrive without compromising the security of user funds or data.

As more TradFi institutions like MultiBank Group enter the cryptocurrency space with ever-expanding expertise in regulatory understanding, the future of the industry is increasingly encouraged. The financial freedoms of the cryptocurrency space coupled with regulatory oversight for financial security will be the guiding lights for the future success of the entire cryptocurrency industry.

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