- Bank of America emphasizes the necessity of a comprehensive regulatory framework for mainstream crypto adoption and institutional engagement.
- Ripple’s court win against SEC creates a regulatory conundrum due to the uniqueness of Ripple’s XRP offerings, rendering the wider implications of the ruling unclear.
As per a recent research report from Bank of America (BAC), a thorough regulatory framework is paramount for the widespread acceptance and institutional involvement in digital assets. However, the recent ruling against the Securities and Exchange Commission (SEC) in its litigation against Ripple Labs does little to bring clarity to this complex regulatory landscape.
Ripple’s Unique Position Muddies the Regulatory Waters
The digital asset sphere greeted the court’s decision with optimism, but Ripple’s XRP offerings have distinct characteristics that make the broader implications of the rulings hard to decipher. The U.S. District Court of the Southern District of New York delivered Ripple a partial triumph earlier this month. It determined that the distribution of Ripple’s XRP token via exchanges and algorithms did not form an investment contract, hence not breaching federal securities laws. However, it found the institutional sale of the tokens in violation of these laws.
Analysts Alkesh Shah and Andrew Moss interpreted the verdict, stating,
“The judge ruled that Ripple’s programmatic sale of XRP on digital asset exchanges did not constitute an unregistered offer and sale of investment contracts, but primarily because an initial unregistered offering and sale to institutional investors had already occurred that created a market.”
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Bank of America continues to differentiate between the trading of blockchain-native crypto tokens, which are still grappling with regulatory establishment, and the trading of tokenized traditional assets such as exchange-traded-funds (ETFs), repos, and gold. The latter has
“rules already established and trading volumes have already reached trillions of dollars.”
Rival broker Needham sees the court’s decision as a positive outcome for crypto exchange Coinbase (COIN), viewing it as a moderating factor against the regulatory pressure on the stock. But the ambiguity left by Ripple’s unique position continues to make it difficult to draw clear-cut implications for the broader crypto industry from this landmark ruling.
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