22nd July 2023 > > The UK and XRP.

tl;dr

The UK continues to debate the need for crypto regulation, but with very little action to back it up. The SEC will appeal the XRP decision.

Market Snap

Market Wrap

$30k remains an obstacle to a breakout move in either direction. A lowly $200 trading range for the last twenty four hours suggests that the market continues to absorb the high volumes of sales from miners with relative ease. The last week has seen a $700 trading range and the last month just $1.5k. It’s difficult to see this calm lasting for much longer.

Curious Cryptos’ Commentary – The UK

On 17th May 2023 the CCC highlighted a report from the Treasury Committee giving its insights into crypto regulation (https://www.curiouscryptos.com/post/17th-may-2023-the-uk).

The report can be found here:

https://committees.parliament.uk/publications/39945/documents/194832/default/

Most of it is utter tripe, repeating tired old tropes about cryptos that have been regurgitated by those who have not bothered to do proper research. However, it has one nugget of gold in its conclusion:

“We strongly recommend that the Government regulates retail trading and investment activity in unbacked cryptoassets as gambling rather than as a financial service, consistent with its stated principle of ‘same risk, same regulatory outcome’.”

Income from gambling is not subject to any form of taxation in the UK.

…

The Treasury has responded to this recommendation with a flat refusal. Andrew Griffith, economic secretary to the UK Treasury, said:

“HM Treasury firmly disagrees with the Committee’s recommendation to regulate “retail trading and investment activity in unbacked crypto assets as gambling rather than as a financial service.”

Which is a shame. Tax-free crypto gains, a concept that presidential hopeful Robert F. Kennedy Jr. is keen on, would be mightily welcomed here at CC Towers.

But this does rather put Griffith at odds with his boss, Andrew Bailey, Governor of the Bank of England. Bailey has made his views plain stating the cryptos have “no intrinsic value”.

The CCC has long been a vocal critic of Bailey and his incompetence. Ramping up money printing at a time when the economy was being deliberately shut down was only ever going to have one result, but Bailey appears not to understand economics lesson 1.0. His major contribution to public policy is that when you are on the other side of the argument to him, you know for sure you are right.

Griffith comments:

“The Government recognises that the benefits and use cases of unbacked cryptoassets, and their underlying technologies, are uncertain and evolving quickly. Some businesses are actively exploring the use of the underlying blockchain technology, which has the potential to boost competition, cut costs, and increase efficiencies.”

He should have a quiet word with his boss.

In classic bureaucratic style, Griffith ends with this:

“As such, HM Treasury agrees with the Committee on the pressing need for robust and timely regulation.”

May I gently suggest you stop talking about it, and get on with it, Mr Griffith?

Curious Cryptos’ Commentary – XRP (Ripple)

In some of the most unsurprising news the SEC will appeal against the judgement handed down in its litigation against Ripple Labs. If you recall, Judge Torres ruled against the SEC on three points, and in favour of the SEC on just one:

“Defendants’ motion for summary judgment is GRANTED as to the Programmatic Sales, the Other Distributions, and Larsen’s and Garlinghouse’s sales, and DENIED as to the Institutional Sales.”

In its case again Terraform Labs and Do Kwon (currently residing in a prison in Montenegro presumably contemplating his forthcoming extradition to a high security jail in the US) the SEC stated:

“Contrary to Defendants’ assertions, much of the Ripple ruling supports the SEC’s claims in this case and rejects arguments Defendants have raised here. However, with respect to the Programmatic and other sales, the SEC respectfully avers that Ripple conflicts with and adds baseless requirements to Howey and its progeny. Respectfully, those portions of Ripple were wrongly decided, and this Court should not follow them. SEC staff is considering the various available avenues for further review and intends to recommend that the SEC seek such review.” (Emphasis all mine).

This does seem rather sly and back-handed to me. It appears that the SEC is attempting to get a different court in different circumstances to overrule the original XRP decision, to then go back to appeal that decision citing this court, if it rules in favour of the SEC.

This is not the way it is supposed to work.