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US SEC may appeal XRP ruling, Kuwait bans crypto as FTX saga unfolds| Weekly recap

us-sec-may-appeal-xrp-ruling-kuwait-bans-crypto-as-ftx-saga-unfolds-weekly-recap
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US SEC may appeal XRP ruling, Kuwait bans crypto as FTX saga unfolds| Weekly recap

This week, the United States Securities and Exchange Commission (SEC) hinted at exploring other legal avenues after Judge Torres ruled that XRP is not a security. Meanwhile, the FTX saga had some surprising revelations. Despite this, regulatory efforts remained in the spotlight amid increasing crypto adoption.

SEC may appeal the XRP court’s ruling

Following Ripple’s win against the SEC, lawyer Marc Fargel expressed skepticism about the court’s ruling. In his view, the ruling could question the watchdog’s arguments on secondary market trading of assets, including crypto.

He predicted possible appeals from both parties, with the regulator having an advantage in overturning the ruling on “programmatic sales.” He noted that if the SEC does not appeal, it could affect the cases it has with other crypto-focused entities such as Binance and Coinbase.

Following Judge Torres’ ruling, which declared XRP as not falling under the definition of a security, this week, Judge Sarah Netburn sought the cooperation of Ripple and the SEC in selecting three suitable dates for a prospective settlement discussion.

Nonetheless, it is essential to manage expectations, as the mere suggestion of a settlement talk does not guarantee an immediate resolution. The potential dialogue will only take place if both parties find it advantageous. 

The decision rendered by Judge Torres on July 13 has left the SEC dissatisfied, and the agency hinted this week that it is now contemplating the possibility of appealing.

The SEC contends that the ruling opposes established securities laws, leading to their consideration of pursuing additional review through an appeal process. 

Judge Torres held that while Ripple’s sale of XRP to prominent investors constituted a breach, it did not apply the same categorization to transactions involving smaller investors. This disparity is a point of contention for the SEC.

New revelations on Bankman-Fried 

The FTX saga also took center stage this week, with intriguing revelations coming to the limelight. The Australian financial watchdog announced on July 19 that it had canceled the operational license of FTX Australia. 

FTX Australia can only provide limited services to settle its obligations and repay its clients until July 12, 2024, when its license is canceled.

Shortly after this, reports from July 20 suggested that FTX’s legal representatives alleged that Sam Bankman-Fried misused customer funds to advance his interests.

Per the report, the new FTX administration is seeking the return of $71.5 million from Bankman-Fried’s Life Science NGO, asserting that the NGO and FTX Foundation utilized user funds to invest in life science enterprises during 2022.

These investments purportedly bolstered Bankman-Fried’s reputation and influence within political and investor circles. Following the collapse of his companies in 2022, FTX reportedly provided financial contributions to politicians in exchange for their support.

Furthermore, court filings from July 20 shed light on the unorthodox measures pursued by Sam Bankman-Fried to safeguard himself and his associates.

Based on these records, Bankman-Fried had considered purchasing Nauru, an independent island nation, as a safe haven for him and his allies in the effective altruism community, especially in the case of major disasters.

In addition, the reports disclosed a significant $22.5 million bonus given to Ellison, an important member of FTX.com, in March 2022. This bonus was granted to the company during a crucial financial period when they faced a substantial $10 billion financial challenge.

The FTX saga unfolds

This week, the new FTX management filed a $1 billion lawsuit against former CEO Sam Bankman-Fried and associates, accusing them of mismanagement and embezzlement. The new management seeks to reclaim these funds.

Allegedly, Bankman-Fried and his associates conducted unauthorized transfers, concealed illegal actions, and lacked proper financial records, contributing to the exchange’s failure. 

The lawsuit cites various transactions, such as $100 million in political donations and over $500 million used to acquire Robinhood shares with government involvement.

Shortly after these reports, the US Department of Justice accused Sam Bankman-Fried of being responsible for leaking private diary entries of his former partner, Caroline Ellison, who was the head of Alameda Research during that period.

Allegedly, SBF shared the diary with a journalist from The New York Times, raising concerns about potential bias in a fair trial. The DoJ aims to prevent the disclosure of extrajudicial statements that could influence an impartial jury.

Indonesia and Shanghai lean toward crypto and blockchain

This week saw efforts to promote the use of crypto and blockchain in both public and private sectors. Indonesia made a major move to enhance the regulatory framework and ensure a secure investment environment by introducing a national crypto exchange and clearing house.

With operations starting on July 17, 2023, the new exchange aims to instill transparency and accountability within the local crypto industry. Notably, renowned licensed crypto companies, such as Tokocrypto from Binance and Indonesia’s largest exchange Indodax, will become active participants on the platform.

Although China continues to prohibit Bitcoin and other cryptocurrencies, the city of Shanghai has proactively welcomed new and innovative technologies, such as blockchain, the digital yuan, and the metaverse. 

In recognition of the significant potential of blockchain, Shanghai has implemented guidelines to encourage the utilization of these advanced technologies. 

Major industry players in various sectors throughout the city are actively encouraged to explore and integrate the practical applications of blockchain. By doing so, the city aims to accelerate the adoption of these transformative technologies, promoting growth and efficiency across multiple industries.

McDonald’s joins metaverse craze

In line with the metaverse trend embraced by prominent brands like Coca-Cola and Gucci, McDonald’s Hong Kong has ventured into the virtual realm by launching “McNuggets Land” on The Sandbox platform. This move celebrates the 40th anniversary of the global launch of Chicken McNuggets.

“McNuggets Land” features a range of mini-games and interactive activities centered around the iconic McNuggets. As players embark on various quests, they stand to earn SAND tokens.

Of noteworthy interest to the Hong Kong community is the opportunity to acquire genuine McDonald’s vouchers by completing quests in “McNuggets Land.” 

US regulatory dilemma

As cryptocurrencies gain popularity among both institutions and individuals, there is a growing need for robust regulatory frameworks. 

However, the United States is still struggling with its regulatory issues. On July 18, Congressman Ritchie Torres expressed his concerns to SEC Chairperson Gary Gensler, urging a halt to the crackdown on cryptocurrencies. He suggests that the agency shift its focus towards going after wrongdoers in the crypto world rather than targeting legitimate businesses.

Torres commended Judge Analisa Torres’ ruling in the Ripple vs. SEC case, wherein XRP was classified as a non-security. Per Torres, the ruling raises pertinent questions about the implications of the SEC’s aggressive stance against cryptocurrencies, especially in light of recent legal outcomes.

The US Senate introduced a bill on July 18 called the Crypto-Asset National Security Enhancement Act of 2023. Its purpose is to regulate DeFi protocols by implementing strict anti-money laundering (AML) rules on entities that manage these protocols or provide user-friendly interfaces for smart contracts.

Entities that invest more than $25 million in DeFi development, even within decentralized protocols, must comply with regulatory requirements. These requirements include conducting customer checks, implementing anti-money laundering measures, and promptly reporting suspicious activities to the authorities.

On the third day after the bill was suggested, Kristin Smith, the CEO of the Blockchain Association, objected the bill, citing inconsistency with decentralized finance principles. The Association emphasized that fraudulent transactions comprised only a fraction of crypto activities last year, in contrast to traditional finance. 

They pointed out that federal law enforcement agencies already possess the required tools to deal with such crimes, making the extra “punitive” actions suggested in the bill superfluous.

Kennedy Jr. slams SEC, leaning for Bitcoin

During the Senate Committee hearing on July 19, Senator Robert F. Kennedy Jr. raised doubts about SEC Chairman Gary Gensler’s efficacy in addressing crypto fraud.

The contentious debate revolved around the bankrupt FTX. Kennedy Jr. expressed astonishment at the SEC’s perceived lack of proactive investigation into FTX, despite Sam Bankman-Fried’s active involvement and high standing in the crypto space.

Straightforwardly, he directly criticized the SEC for not deploying investigators to thoroughly examine FTX and raise necessary questions about Bankman-Fried’s source of wealth.

Amid this regulatory dilemma, Robert F. Kennedy Jr., the Democratic presidential candidate, in a video interview with Heal The Divide and Bitcoin Magazine, revealed his enthusiastic support for cryptocurrencies, especially Bitcoin. 

RFK Jr. proposes an initial move to back 1% of Treasury Bills, T-bills, with a hard currency like gold or Bitcoin, with gradual increments over time. He firmly believes that this strategic approach will not only bolster the adoption of Bitcoin within the country but also attract a surge of investments. 

Kuwait bans crypto, UK exploring appropriate measures

The regulatory dilemma is not unique to the United States alone. Kuwait’s Central Markets Authority (CMA) banned all cryptocurrency activities, including payments, mining, and investment, this week. 

The move followed a study by the National Committee for Fighting Money Laundering and Financing of Terrorism to comply with international standards. However, the FATF does not mandate such bans. The CMA warned of penalties for violations but clarified that the ban does not affect regulated securities or other financial tools.

Meanwhile, Britain’s Financial Services Minister, Andrew Griffith, addressed the Parliament’s Treasury Select Committee’s report from May, which recommended categorizing specific crypto assets, such as bitcoin and ether, as gambling due to consumer risks.

Griffith disagreed with this proposition, citing concerns over potential discrepancies with global and European Union regulators. The UK, instead, adopts a balanced approach, cautioning investors about the inherent risks of crypto investments while actively developing suitable regulatory frameworks for the sector.