FreeCryptoCurrency.Me

Episode 65 of Season 5 of The Scoop was recorded with The Block’s Frank Chaparro and Associate Professor of Law at George Mason Law School and former Advisory Committee Member to the U.S. Securities and Exchange Commission J.W. Verret.

Listen below, and subscribe to The Scoop on Youtube, Apple, Spotify, Google Podcasts, Stitcher, or wherever you listen to podcasts. Please send feedback and revision requests to podcast@theblock.co.

---

Professor J.W. Verret teaches corporate and securities law and financial accounting at George Mason Law School.

 In this episode, Verret analyzes the recent verdict on Ripple’s XRP token which concludes that “Ripple’s Programmatic Sales of XRP did not constitute the offer and sale of investment contracts.”

In addition to providing a degree of regulatory clarity for crypto assets, Verret also argues that the court’s decision in the XRP case will greatly improve Coinbase’s chances in their court case against the SEC.

Outline:

1:05 – XRP court verdict

6:00 – Coinbase re-listing XRP

7:15 – Coinbase vs. SEC

9:55 – Will the SEC settle?

12:08 – Appellate court

13:04 – New SEC Chair

14:06 – Unregistered securities

15:00 – Major Questions Doctrine

16:22 – Crypto legislation

17:00 – Partisan politics

20:40 – Spot Bitcoin ETF

22:05 – Closing thoughts

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Lending protocol Aave has ventured into the realm of decentralized digital dollars by activating its decentralized GHO stablecoin on the Ethereum mainnet. 

The decisive move is a result of executing the approved governance vote put forth by Aave’s decentralized autonomous organization earlier this week. The GHO stablecoin, which was initially released on the Goerli testnet back in February 2023, will be available for users on the Aave version 3 on Ethereum.

This development aligns with an industry trend that is seeing DeFi platforms roll out their own stablecoins. Curve Finance, one the largest decentralized exchanges by trading volume, also launched its own overcollateralized stablecoin in May. 

Stablecoins are assets designed to mitigate market volatility by anchoring them to a pool of assets, typically fiat currencies or other cryptocurrencies. 

How GHO works

GHO will be backed by crypto assets like ether (ETH), with the Aave protocol issuing it as an overcollateralized loan, a mechanism akin to the one employed by MakerDAO for its DAI stablecoin. This method necessitates that users deposit crypto assets as collateral that exceed the value of the amount they intend to borrow.

The GHO stablecoin relies on a smart contract system called Ethereum Facilitator. This system enables users to deposit collateral and lend out GHO, with all collateral stored in the Ethereum mainnet pool. 

Upon launch, ‘facilitators’ — entities sanctioned by the DAO — will be authorized to issue GHO. The Aave V3 Ethereum platform has been confirmed as the first facilitator permitted to issue GHO.

A crucial feature of the GHO stablecoin is that it will redirect all interest accrued from loans directly to the Aave DAO treasury. The Aave DAO will vote and govern decisions like acceptable collateral assets for GHO as well as risk parameters.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The recent ruling on Ripple’s XRP token benefits Coinbase as it narrows the crypto exchange operator’s downside risk, according to JPMorgan.

“The ruling appears on the surface to be a win for Coinbase in its recent lawsuit by the SEC,” JPMorgan equity analysts led by Kenneth Worthington wrote in a report on Friday. “We see Coinbase in the best position to benefit from the improved confidence and regulatory clarity given Coinbase’s market-leading position and respected reputation in the industry.”

Earlier this week, Ripple pocketed partial victory after a federal judge ruled that its XRP token is not a security when sold on the secondary market but is a security when sold to institutional investors. The ruling is favorable for Coinbase since it may be applied to the 13 tokens actively traded on Coinbase that the United States Securities and Exchange Commission alleged are securities in its lawsuit against the company last month, according to JPMorgan analysts.

“If the Ripple case stands, it would appear more challenging for the SEC to demonstrate the 13 [tokens] are securities and that Coinbase is an unregistered securities exchange thus excusing it from certain future licensing and regulatory requirements,” the analysts wrote.

While the Ripple ruling narrows downside risk for Coinbase, it does not offer significant incremental upside for the company, according to the analysts. That is because Coinbase’s staking and wallet products are also part of the SEC lawsuit, and thus, it would appear that “Coinbase is not ‘out of the woods’ completely just yet,” they noted. “Furthermore, the SEC can appeal the Ripple decision furthering the uncertainty of the implications of the Ripple judgement.” JPMorgan has a neutral rating on Coinbase, per the report.

Overall, JPMorgan analysts “remain bullish on the cryptoecosystem longer term,” and they are “encouraged by some certainty from this ruling that contributes to the mosaic of the U.S. regulatory crypto landscape.”

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Cathie Wood’s Ark Invest sold more Coinbase shares on Friday as the stock continued to rally off the back of rulings in the SEC’s case against Ripple.

Ark’s flagship fund, Ark Innovation ETF, sold 263,247 shares of Coinbase, according to an update from the fund manager’s trading desk on Friday. Its Ark Next Generation Internet ETF sold 93,227 shares, and Ark Fintech Innovation ETF sold 121,882 shares. Together, the sales were worth $50.37 million, based on the stock’s closing price of around $105 on Friday.

The sales were Ark’s second during the week after it sold $12 million worth of Coinbase shares on Tuesday. The shares have rallied after Coinbase was listed as a surveillance-sharing partner for several spot bitcoin ETF applicants, including giants BlackRock and Fidelity. Plus more recently, legal rulings around the status of the cryptocurrency XRP has buoyed further industry optimism.

Ark Invest has started to pare its holding of Coinbase for the first time in almost a year. Still, it is the second-largest owner of Coinbase shares, with a 6.30% stake, according to CNN data.

Coinbase has jumped nearly 200% this year despite facing a lawsuit from the United States Securities and Exchange Commission, reflecting the broader upward trend observed in crypto-related stocks.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Ripple Labs CEO Brad Garlinghouse called the Securities and Exchange Commission a “bully” on Friday, a day after obtaining what it described as a win in an ongoing legal dispute. 

Ripple pocketed the victory on Thursday after a federal judge ruled that some of its sales of XRP did not fully meet the definition of a securities offering. XRP’s value subsequently increased as much as 85% after the ruling, and exchanges began relisting the token.

“I think the SEC has been a bully, and they’ve gone after weak players who couldn’t mount a proper defense,” Garlinghouse said Friday in an interview with Bloomberg. 

The SEC accused Ripple in 2020 of illegally raising $1.3 billion through the sale of XRP. A judge on Thursday seemingly decided that XRP was not a security when sold on the secondary market, but would be a security when sold to institutional investors. 

“The law of the land right now is that XRP is not a security,” Garlinghouse said on Bloomberg TV.

SEC’s crypto enforcement history

In the first months of 2023, the SEC ramped up its crypto enforcement, according to an updated June report from consulting firm Cornerstone Research. 

As of June 6, the agency brought 24 enforcement actions, including litigation and administrative proceedings. In 2022, the agency brought 30 enforcement actions total, which was a record at the time, according to the firm.

The SEC and Ripple could still appeal the judge’s decision. An appeal from the SEC could take years, Garlinghouse told Bloomberg. 

“The court agreed with the SEC that the Howey test governs the securities analysis of crypto transactions and rejected Ripple’s made-up test as to what constitutes an investment contract, instead emphasizing that Howey and subsequent cases have held that a variety of tangible and intangible assets can serve as the subject of an investment contract,” the SEC said in a statement to The Block following the judge’s decision. 

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

BlackRock CEO Larry Fink sang crypto’s praise again on Friday, just a week after he highlighted the role of bitcoin as a kind of “digitizing gold.”

“It’s an international asset,” he said in an interview with CNBC, referring to crypto on broad terms. “It has a differentiating value versus other asset classes, but more importantly, because it’s so international, it’s going to transcend any one currency.”

“If you just look at the value of our dollar, how it depreciated the past two months and how much it appreciated over the last five years, a international crypto product can really transcend that,” he continued. “And that’s why we believe there’s great opportunities. And that’s why were seeing more and more interest. And that interest is broad-based, worldwide.”

The asset manager last month filed an application with the Securities and Exchange Commission for a spot bitcoin ETF, triggering a widespread rally in the sector. The SEC has yet to approve a spot bitcoin fund.

BlackRock wants to ‘democratize investing’

“We believe we have a responsibility to democratize investing,” Fink said, commenting on broader growth in the ETF market and highlighting how gold funds had brought down the costs of transactions for the metal. “Now, with crypto, the idea of democratizing that role…the cost right now to transact, it’s quite expensive. We’re talking points, not decimal points.”

Fink said that he couldn’t talk specifically about bitcoin because of the pending application.

“We are working with our regulators,” he added. “If BlackRock’s name is going to be on it, we’re going to make sure that it’s safe and sound and protected.”

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

tk

Coinbase said retail clients in four states will no longer to be able to add new assets to its staking product while numerous legal proceedings carry on. 

Ten states — including Alabama, California, and New Jersey — filed actions against the exchange to halt its staking program within their jurisdictions on the heels of the Securities and Exchange Commission’s lawsuit against the firm in June.

The SEC and several states argue that the product constitutes a unregistered security offering. Coinbase claims staking is not a security, maintaining that it is a “core part of ensuring the cryptoeconomy functions for hundreds of millions of users around the globe.”

The firm has been engaged with policymakers across several states to keep its staking program intact for all users, but California, New Jersey, South Carolina, and Wisconsin will require the firm to stop processing additional staking assets for customers.

“Customers’ crypto that was staked before these orders were issued remains unaffected,” the company said in the Friday blog post. “Impacted customers have received an email with more information specific to their state, and all customers can visit our Help Center to learn more about these actions and the changes we will be implementing in the coming weeks in these four states.”

Coinbase staking services will operate normally in other states

Coinbase’s staking services will operate normally in the other states in which there are ongoing proceedings. 

“Staking is not some exotic or complex financial product,” the company said.

“In fact, it is not a financial product at all,” it continued. “Whether a user stakes on their own or through a service like ours, they remain the owner of their crypto at all times. Unlike lending, for example, there is no risk that a borrower will fail to repay, because the underlying crypto remains in custody from start to finish.”

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

A long-awaited district judge’s ruling that some XRP token sales were not investment contracts will likely eventually lead to a bipartisan regulatory framework that is more favorable to the pro-crypto crowd in Congress, writes John Rizzo.

Coinbase shares declined on Friday after a gangbuster session for the stock the day prior, though financial institutions have increased the stock’s overall price target. 

COIN was trading down 3.3% to $103.50 at 3:31 p.m. in New York, according to TradingView.

The firm, which has seen its stock price surge since the beginning of the year, rallied more than 20% on Thursday alongside the broader crypto market after a judge ruled that Ripple Lab’s sales of XRP on exchanges did not violate securities laws. 

Relative to bitcoin, the firm’s stock has taken off since mid-June. That’s been underpinned by headlines of its involvement in the launch of a number of proposed spot bitcoin exchange-traded funds. 

Earlier Friday, shares in the exchange surged above $110. 

Increased price targets

Private investment firm WedBush said in a Thursday report that it increased its price target on the company to $110.

“We are specifically encouraged by the suggestion that XRP sale on the public exchanges did not involve securities,” the firm wrote.

The bank Needbush also increased its price target to $120 from $70 following the decision, Coinbase reported.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.