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20th July 2022 > > Celsius Network and XRP.

tl;dr

Bad news for Celsius creditors, and good news for Ripple investors.


Market Snap (at time of writing)








Market Wrap

On chain data analysed by Glassnode Analytics suggests that a lot of recent buys who are weak hands have recently capitulated, selling coins at a loss. This may be the cause of current strength in the price of BTC.


It is never possible to call a market bottom, and events can conspire to roil risk markets at any time.


If psychopathic Putin and his murderous henchmen do not turn Nordstream1 back on later this week, equity markets are likely to be volatile. This would put the ECB in the invidious position of running down quantitative easing whilst raising interest rates tomorrow in the teeth of a virtually guaranteed recession.


That is not a situation one would wish on anyone and is not helpful.


Curious Cryptos’ Commentary – Celsius Network

Readers will recall that Celsius Network – a centralised crypto lending and borrowing platform – recently filed for bankruptcy following the Terra fiasco, and the collapse of Three Arrows Capital (3AC).


The waters surrounding Celsius, and some related entities appear murky, and it may be some time before the true picture emerges.


Celsius has claimed to have 150,000 BTC under its control, but creditors in the form of individuals who deposited stablecoins on the platform for yields of around 20% should not get too excited.


During the first bankruptcy hearing, the lawyers representing Celsius pointed to a clause in the Terms of Service which states:


“Title to coins is transferred to Celsius, and Celsius is entitled to use, sell, pledge, and rehypothecate these coins.”


There are very few people in the world who bother to read T&Cs, and even fewer who would understand the full force of these words.


In effect, the lawyers argue that this means the depositors are not creditors of Celsius, and therefore are not due any potential pay out from the bankruptcy proceedings.


This is going to be a long and difficult legal battle, but it does reinforce my opinion – expressed on 1st and 2nd November 2021 in these very pages – that depositing stablecoins for less than 100% APY is simply not worth the risk.


Curious Cryptos’ Commentary – US regulation

The Responsible Financial Innovation Act introduced to the U.S. Senate on 6th June 2022 looks as though it will be delayed until next year.


One of the key elements of this act was to make it expressly plain that BTC is a commodity, but it remained quiet as to whether any other cryptos would be classified as commodities or securities.


This is a big deal, both for executives who may have breached securities laws (which can result in lengthy prison sentences) and for investors, notably those who own Ripple (XRP).

But there is potentially some very good news.


A separate piece of legislation has been proposed that the Commodities and Futures Trading Commission (CFTC) is designated the lead regulator, making an explicit assumption that all cryptos are commodities.


This does not mean that exceptions cannot be made in relation to specific coins. Certainly Gary Gensler, chair of the Securities Exchange Commission (SEC) has been working to classify some cryptos as securities and therefore they would fall under his aegis.


But if this proposed new bill becomes law, his task to claim regulatory ownership of cryptos such as XRP suddenly becomes that much more difficult.

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