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Crypto Regulation

Gensler inches closer to SEC Chair, will he withdraw the Ripple lawsuit?

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SEC commissioner Gary Gensler

Gary Gensler is edging closer to taking charge at the Securities and Exchange Commission (SEC). With that, the Ripple faithful hold hope that one of Gensler’s first acts, if he clears the final hurdle, will be to withdraw the lawsuit.

The suggestion comes from former SEC Commissioner Paul Atkins, who served between 2002-2008.  Atkins commented that it is within Gensler’s power to withdraw the lawsuit. Should he refuse to do that, Atkins predicts the case could end up at the Supreme Court.

The incoming SEC chair, Gary Gensler, could withdraw the lawsuit against Ripple. If not, the case may ultimately go before the U.S. Supreme Court.”

Gensler almost home and dry

President Biden’s pick for SEC Chair’s role, Gary Gensler, received a boost today following a 14-10 vote by the Senate Banking Committee in favor of his appointment. The matter will now go before the Senate floor for confirmation.

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The event coincided with the total crypto market cap breaking through $1.7tr resistance. The last time this happened was February 20, a day later, Bitcoin hit $58k.

Undoubtedly, crypto markets are bullish over Gensler’s progress towards the SEC Chair position. And for a good reason too. In January, IOHK CEO Charles Hoskinson pointed out that Gensler knows his crypto. This bodes well for having a constructive dialogue.

“The thing I like about the appointment of Gensler is that he is competent. He’s clearly a very smart guy and he fully understands our industry to the extent that he taught at MIT on our industry.”

However, should Gensler receive Senate floor approval, what are the odds he will secede the Ripple case?

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Likelihood of Ripple withdrawal

Gensler has previously given his view on whether XRP is a security or not. In 2018, at an MIT conference, Gensler put forward the case that both XRP and Ether should be considered securities.

That being so, if Gensler maintains this view, it’s unlikely he would interfere with ongoing legal action that affirms this opinion.

Despite the cries of injustice from Ripple investors and partners, the matter will probably have to go through the court system to its full conclusion. A prediction Gensler made at the conference three years ago.

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As a side note, might Gensler’s appointment spell trouble for Ethereum? As pointed out, Gensler believes Ether fits the characteristics of a security.

William Hinman, the SEC Commissioner at the time, took the opposing view by saying:

“based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions.”

However, since the SEC lawsuit began, Ether’s free pass has been a point of contention with the Ripple team.

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Crypto Regulation

Commissioner Peirce suggests SEC to work with crypto businesses to build a “reasonable framework”

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Commissioner Hester Peirce, aka “crypto mom” strikes back at the SEC for not working with crypto businesses in carving out a reasonable framework for the securities laws. Peirce spoke remotely at the Wall Street Journal’s Tech Live conference on Wednesday and continued to criticize SEC Chief, Gary Gensler on his anti-crypto stance.

Furthermore, Peirce suggested that the commission should decipher a system to work with cryptocurrency firms, given the inevitable growth of the decentralized industry. The Commissioner noted that the sooner regulators understand the importance of crypto, the better it will be in foreseeable future for the nation’s financial markets.

“I think it’s safe to assume that crypto is going to grow in size…And so what we can do now to invest in building a reasonable framework, I think, will pay off down the line.”, said Peirce.

SEC rules are affecting small businesses

The Commissioner highlighted the authorities’ perspective, noting that the conservative approach is to steer clear of accusations if anything goes south. However, Peirce also emphasized that this conservative approach negatively targets start-ups and smaller businesses, as they get caught up in the “tremendously hard” and time-consuming process of complying with SEC rules.

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“Regulators tend to be very conservative for a reason…If something doesn’t get approved, we’re not going to get blamed; if something does get approved and something goes wrong, we will get blamed. But that hesitation is really costly for smaller entities.”, Peirce added.

SEC failure to draw up a clear legal framework

Earlier this month, Commissioner Peirce was seen in her ‘crypto mom’ form, criticizing the government for its inability to finalize a clear legal framework for virtual currencies in the United States. At Yahoo Finance Live, Peirce noted that “it’s a real shame” that the US regulators’ are consistently failing at drawing up a clear legal framework for cryptocurrencies and securities.

“It is disconcerting to me that for three years now I’ve been asking for regulatory clarity, and we can’t seem to provide any…I think this is really becoming a huge barrier to this industry being able to develop in a way that’s safe, but also in a way that allows innovation to happen. And it’s a real shame to me that we are not just taking up the mantle as regulators to develop a regulatory framework.”

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Crypto Regulation

SEC Commissioner Warns Celebrities Will Not Bail Out Crypto Buyers

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Celebrities will not bail out naive cryptocurrency buyers, SEC commissioner warns

U.S. Securities and Exchange Commissioner Hester Peirce told Washington-based newspaper Roll Call that cryptocurrency investors have to manage their risk tolerance when taking cryptocurrency advice from celebrities.

Peirce, who is affectionally called “Crypto Mom” because of her pro-cryptocurrency stance, warns that there will no bailouts if things go south:

It’s your money that’s on the line, so do your own research and make your own decision based on your own risk tolerance and your own circumstances. After all, if things turn out badly, the celebrity won’t be there to bail you out.

During the initial coin offering (ICO) mania, some celebs were charged by the SEC with unlawfully shilling tokens on their social media profiles. Actor Steven Seagal, who became a Russian citizen in 2016, agreed to pay a disgorgement of roughly $330,000 in 2020. After he failed to pay the whole fine, the agency moved to collect money through his U.S. representatives.

A slew of musicians, actors, athletes and prominent influencers hopped on the crypto train once again to cash in on the ongoing bull run.

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As reported by U.Today, Kim Kardashian’s ad promoting a dubious cryptocurrency called “Ethereum Max” was seen by a third of crypto owners.

In September, Charles Randell, the head of the UK’s Financial Conduct Authority (FCA), stated that those who invested their money in the token promoted by Kim K had to be prepared to lose it all.

Dogecoin, the meme cryptocurrency touted by centibillionaire Elon Musk, rapper Snoop Dogg and a bunch of other stars, is currently down 66% from its historic peak that coincided with Musk’s appearance on “Saturday Night Live” in early May.

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Law professor Lawrence Cunningham told Roll Call that celebrities, who often have little to no knowledge of crypto, are fueling crypto speculation, which can cause system risks:

At scale, that can lead to a systemic misallocation of capital with adverse system-wide effects.

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XRP

Gary Gensler met with Jay Clayton in 2018 and was instrumental in XRP hostility: Report

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  • Gary Gensler is said to have held a sitting in 2018 with Jay Clayton to discuss cryptocurrencies, and he was fond of BTC and hostile towards XRP and Ethereum.
  • According to a new report, Gensler’s contribution to the meeting was instrumental in the ensuing XRP hostility and even the famous Bill Hinman speech.

When Gary Gensler took over at the U.S Securities and Exchange Commission (SEC) this year, many in the cryptocurrency community touted it to be the beginning of a new era – one that would spell clarity and prosperity for the nascent industry. However, it’s been anything but. Genser has been just as tough, if not even more so than his predecessor. And as a new report now reveals, Gensler’s hostility, especially towards XRP, started years ago and could have influenced the SEC’s stand against the cryptocurrency even before he took over the leadership.

The report by the New York Post revealed that Gensler met with his predecessor Jay Clayton in 2018. At the time, Gensler was just settling into his new role as a professor at the MIT Sloan School of Management. Ironically, at MIT, he served as the senior advisor to the school’s Digital Currency Initiative, teaching extensively about blockchain technology.

According to Charles Gasparino, the Fox Business reporter who exposed the 2018 meeting, the two leaders talked about how much they could regulate cryptocurrencies at the meeting.

Citing sources who were privy to the meeting, the report claims Clayton and Gensler dwelt on how digital currencies were largely unregulated and a haven for scams. They both agreed that most coins were securities that fell under the SEC oversight.

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Liking Bitcoin, opposing Ether and XRP

Gensler has always been a big fan of Bitcoin, a fact he conveyed during the meeting. According to him, it was the only “true crypto.” This is a belief he has held since before joining MIT and the SEC, back when he was the head of the CFTC, yet another regulator that has dipped its toes into cryptocurrency regulation.

Gensler disliked Ethereum, which at the time wasn’t nearly as big as it is today. He disliked XRP even more, sources revealed. Both, he claimed, were securities that were using jargon and regulatory ambiguity to escape securities regulations.

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Gensler has never been shy to admit that he believes the two – Ethereum and XRP – are securities and not currencies. In 2018, he gave an interview to the New York Times in which he claimed:

There is a strong case for both of them — but particularly Ripple — that they are non-compliant securities.

According to those close to the economist, his biggest problem with XRP and Ether are that Ripple and the Ethereum Foundation respectively sold the coins and used the proceeds to build their platforms. This makes them illegal securities.

It gets better.

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Three months after the Clayton-Gensler meeting, Bill Hinman went on to give his famous 2018 speech. Hinman, who was the director of the division of corporate finance at the SEC, claimed that BTC and ETH were not securities.

This speech has been the subject of intense legal face-offs between Ripple and the SEC in their ongoing lawsuit. Hinman has claimed that these were personal opinions. However, according to the report, Clayton reviewed the Hinman speech before the presentation, “and provided some reactions.”

And if this in itself isn’t dubious enough, there’s the career advancements of the two – Clayton and Hinman – after leaving the SEC. As CNF reported Clayton now works with an organization that manages billions of dollars worth of BTC. The firm, known as One River Asset Management, has even applied for a Bitcoin ETF, which ironically, Clayton repeatedly turned down when at the helm of the SEC.

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Hinman, on the other hand, is an adviser to Simpson, Thatcher and Bartlett, a member of the Enterprise Ethereum Alliance, which seeks to advance the growth of the Ethereum blockchain.

Is the SEC picking the winners and losers?

Just about a year ago, there were three top cryptocurrencies – Bitcoin, Ethereum and XRP. While the other altcoins were coming up quite remarkably, these were the three to watch. The SEC’s lawsuit against XRP dismantled this trinity, bringing devastating losses to XRP, and since then, it has yet to recover.

XRP is the only cryptocurrency in the top 10 to not hit an all-time high in this year’s bull run.

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Gasparino believes that the SEC is picking winners and losers, and at the moment, it’s skewed against XRP and for Bitcoin. The top cryptocurrency recently had an ETF approved, indicative that the SEC is fully onboard with the coin, he observed.

Ethereum held an ICO, why aren’t they [SEC] going after them? It’s just a weird regulatory thing that they’ve got going on here. I think it’s time Congress steps in if this [the blockchain industry]is worth saving. The Internet was worth saving.

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