July 17, 2023 (MLN): Crypto industry faced a harsh reality check throughout 2022 since its peak in late 2021. The market lost nearly $2 trillion of value in cryptocurrencies, as many digital asset firms fell apart under accusations of fraud and manipulation.
Institutional interest in crypto investing had waned after the industry went through a market crash and high-profile firms including FTX collapsed last year.
The global cryptocurrency industry has also been caught in the crosshairs of the U.S. securities regulator on alleged violations of securities laws.
The U.S. Securities and Exchange Commission had recently widened its crackdown on the crypto industry through lawsuits against two of the biggest firms, Binance and Coinbase, alleging that they acted as unregistered securities exchanges, broker-dealers, and clearinghouses.
SEC Chair Gary Gensler has long criticized existing crypto platforms for failing to separate different parts of their businesses, such as custody, market-making, and trading, which could result in conflicts of interest.
The Fall: FTX and Financial Turmoil
To note, Bitcoin (BTC/USDT) prices made a peak in November 2021 of $69,000, before plunging by 75% to a low of $15,476 just a year later, in November 2022.
Big players inside the industry were falling apart, like the Terra Luna saga and the fall of FTX, the world’s third-largest crypto exchange run by Sam Bankman-Fried.
Crypto exchange FTX filed for Chapter 11 bankruptcy protection in the United States in November 2022 due to a more than $10bn liquidity crisis, this was a major blow and sent shivers through the industry.
The U.S. bankruptcy proceedings involved multiple FTX group companies with more than 100,000, and possibly over 1 million, creditors.
However, it is pertinent to note that, it was not only the crypto industry but also the majority of risk-on financial markets that experienced a huge decline in prices.
In 2022, the majority of the biggest U.S. stocks, such as Tesla, Netflix, Facebook (Meta), and Paypal, plummeted by more than 70% in their stock prices.
This was due to the fastest-ever pace of interest rate hikes by the U.S. Federal Reserve, as they continued to tighten the monetary policy throughout the year.
The Rebound in 2023
However, at a time when the cryptocurrency industry has been caught in the crosshairs of the U.S. securities regulator on alleged violations of securities laws, the market seems to be holding its ground this year amid some positivity.
Bitcoin (BTC/USDT) is up 95% since the lows of November 2022, and up 82.95% year-to-date.
Similarly, the total cryptocurrency industry market capitalisation has risen from around $790bn in November 2022 to $1.21 trillion now, marking a rise of 62%.
Crypto adoption rises
BlackRock Inc (NYSE: BLK), the world's biggest asset manager, filed for a bitcoin exchange-traded fund (ETF) on June 15.
The ETF would allow investors to get exposure to the cryptocurrency, as the asset class comes under intense regulatory scrutiny.
Joshua Chu, group chief risk officer at blockchain technology group XBE, Coinllectibles and Marvion said that "the fact that BlackRock, a well-respected and established asset management company, has filed for a Bitcoin ETF could be seen as a positive development in the quest for regulatory approval."
"It also shows the resilience of the public's interest in crypto," he added.
Market participants believe there is a very high probability of the BlackRock ETF being accepted.
BlackRock has a 99.86% success rate in getting ETFs approved, with 576 ETF applications and 575 approved.
EDX Markets (EDX), which is backed by Fidelity Digital Assets, Charles Schwab and Citadel Securities, launched their own crypto exchange going live on June 20.
A new crypto exchange backed by firms including Citadel Securities, Fidelity Digital Assets, and Charles Schwab Corp could reshape the digital-asset landscape amid heightened US scrutiny of the sector.
Major win against the SEC
Whether cryptocurrencies are securities have been a major question hanging over the industry, which has long fought efforts to regulate them by arguing that they are not.
The SEC sued Coinbase in June for the sale of unregistered securities.
On July 13, 2023, a U.S. judge finally dismissed the claim that Ripple Labs Inc violated federal securities law by selling its XRP token on public exchanges, providing a huge relief to the millions of XRP holders and a vindication for not just the vision of Ripple Labs, but the whole industry.
The judge also ruled that institutional sales of XRP by Ripple were securities.
To recall, the SEC had accused the company (RIPPLE) and its current and former chief executives of conducting a $1.3bn unregistered securities offering by selling XRP, which Ripple's founders created in 2012.
The case has been closely watched in the cryptocurrency industry, which disputes the SEC's assertion that the vast majority of crypto tokens are securities and subject to its strict investor protection rules.
The ruling by U.S. District Judge Analisa Torres marks the first huge win for the cryptocurrency industry, as a matter of law, XRP is not a security.
This ruling from the Ripple case should also bode well for Coinbase, because it “undermines the SEC’s position that tokens sold on Coinbase’s platform were sales of unregistered securities.”
To recall, SEC had sued Coinbase for the unregistered offer and sale of securities, earlier in June 2023.
Copyright Mettis Link News
Posted on: 2023-07-17T13:22:50+05:00
