1st November 2022 > > SEC and XRP.

tl;dr

Hester Peirce’s criticism of her own agency is positive for XRP (Ripple) and the broader crypto industry.

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Leveraged shorts are taking the view that a breach of $21k to the upside is too big of an ask for now, following several failed attempts in recent days. I always feel much more comfortable with a negative perpetual futures funding rate - it appeals to my contrarian investment philosophy.

Curious Cryptos’ Commentary – Hester Peirce, Commissioner for the SEC

Crypto enthusiasts maintain that the SEC (Securities and Exchange Commission) have been too harsh in their approach to cryptos. They claim that the SEC has failed to live up to its own obligations, and that it has been inconsistent in its application of regulatory actions. Most damagingly for the SEC, it has been accused of trying to develop a legislative framework through a process akin to developing case law in the criminal justice system, in breach of all previous regulatory good practice.

There is a justified belief that Gary Gensler, chair of the SEC, is on a one-man mission to extend the SEC’s remit beyond its legally mandated scope.

Crypto enthusiasts are of course partial observers, and cynics might wish to warn that these accusations against the SEC are baseless, simply motivated by a desire to hollow out the regulatory landscape.

I would vehemently disagree that such a statement applies to anyone except the extreme crypto maximalists, who yearn for a Wild West approach that results in the effective elimination of all fiat currencies, but especially the dollar. They know not of what they wish for.

…

Crypto enthusiasts have just recruited a new voice in their pushback against Gensler and the over-reach of the SEC. And this is no minor voice, for it is Hester Pierce, who is the Commissioner for the SEC, effectively making her Gensler’s boss.

Hester pulls no punches when criticising the current approach:

“Crypto is being treated differently.”

That puts Gensler on the spot right there.

She makes the point that the SEC is no longer conforming to historical norms. Under normal circumstances, Hester explains how the SEC usually works:

“Typically, when we write a rule, we go out with a proposal. People are talking to the regulator; we're talking to the public. It's a very healthy conversation.”

However, regarding cryptos:

“Nobody else is in the room. The customers aren't in the room. The competitors aren't in the room. And the regulator has the leverage because the regulator's about to bring an enforcement action. It’s just not a good way of regulating.”

Pow! Bash! Bosh! That looks suspiciously like Gensler is struggling to get off the floor.

Hester’s motivation for this intervention is that she is concerned that the SEC will become side-lined with their current aggressive approach, a fear that is on the cusp of being realised as the pressure grows for public declarations of which cryptos are commodities to be regulated by the CFTC (Commodities and Futures Trading Commission), who have shown a true willingness to work with the crypto industry.

Curious Cryptos’ Commentary – What does this mean for XRP (Ripple)

The two-year battle between the SEC and Ripple Labs, Inc. to determine whether XRP is a security or a commodity, may be resolved by the middle of 2023 according to Brad Garlinghouse, CEO of Ripple Labs, Inc. The ramifications of this decision, to be determined by a court judge, will echo down through the ages.

It is no understatement to suggest that the health or otherwise of the US based crypto industry for the next decade depends upon this decision.

Which makes Hester’s intervention more interesting.

Centralised crypto exchange Coinbase has recently filed an instrument known as an “amicus brief”:

According to the amicus brief:

"Given the absence of SEC rulemaking for the cryptocurrency industry, the question of whether the SEC has given fair notice before bringing an enforcement action against sales of one of the thousands of unique digital assets will often be highly fact-intensive, which makes it particularly ill-suited for adjudication on summary judgment."

The central point here has been echoed by Hester above – that the SEC is not acting in the way it should in developing a regulatory framework for cryptos. Hester’s input will carry much weight with the judge.