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Regulatory Tides Turn Positive for Crypto 🚀
Welcome to this week’s edition of the Myth Of Money. We have decided to move away from our regular Sunday schedule. Over the summer, the newsletter will come out every Tuesday. If you would like to still hear from me on Sundays, you can find me surfing in Malibu :)
US judge rules Ripple XRP is not a security
Ripple Labs scored a victory in the United States District Court in the Southern District of New York on July 13 as Judge Analisa Torres ruled partially in favor of the company in a case brought forth by the Securities and Exchange Commission dating back to 2020.
According to documents filed on July 13, Judge Torres has granted summary judgment in favor of Ripple Labs, ruling that the XRP token is not a security, but only in regards to programmatic sales on digital asset exchanges. However, the SEC also managed to notch a victory of its own, as the federal judge has ruled that XRP is a security when sold to institutional investors, as it met the conditions set in the Howey Test.
The SEC lawsuit sought to compel Ripple to stop offering its XRP token under the premise that XRP was a security and, thus, required additional regulation. The case against Ripple has been ongoing since December 2020 when the SEC sued Ripple and its two chief executives, Brad Garlinghouse and Chris Larsen, over allegations the company was offering an unregistered security.
US Congressman Torres Urges SEC Chair Gensler to Stop Attack on Crypto
In his recent letter, Congressman Torres has raised concerns about the Securities and Exchange Commission's (SEC) approach towards regulating cryptocurrencies. The letter specifically questions whether the SEC intends to reevaluate its aggressive regulatory stance on crypto assets. This inquiry comes in the aftermath of the SEC's loss in a lawsuit against Ripple, where the judge ruled that XRP is not a security. According to the congressman, the SEC's implementation of the Howey Test was haphazard, and the court's decision demonstrates the need for a more rigorous application of regulations.
Furthermore, the letter highlights a significant development regarding the regulatory scope of the SEC. A federal judge's ruling classified certain digital-asset transactions as falling outside the SEC's regulatory domain. Congressman Torres emphasizes that while crypto assets may not be considered securities on their own, they can be included in investment contracts that are classified as securities. Additionally, the letter points out the judge's criticism of the SEC's failure to provide fair notice to the industry.
It is crucial to note that this correspondence arrives during a period of regulatory uncertainty surrounding cryptocurrencies in the United States.
Coinbase Stock Rallies
Coinbase faced criticism for listing potentially classified securities after receiving a Wells Notice from the SEC a few months ago. However, there was optimism following a recent ruling that indicated many of the tokens freely traded on Coinbase might not be considered securities. Taking advantage of this development, Coinbase promptly relisted XRP, resulting in a substantial 18% surge in its stock price.
Cathie Wood, the founder and CEO of ARK Investment Management, expressed her positive outlook on Coinbase following Ripple's partial victory in its legal battle with the SEC on July 13. While Wood acknowledged that the ruling didn't outright favor Ripple, she regarded it as a largely positive outcome for cryptocurrency exchanges in general.
Wood's sentiments align with other experts in the crypto industry who believe that the ruling, which determined that XRP tokens sold to retail investors on crypto exchanges were not securities, could establish a favorable precedent for Coinbase and Binance in their respective legal disputes with the SEC.
Despite Coinbase receiving a Wells notice in March and facing a lawsuit from the SEC in June, Wood pointed out that the company's share price did not plummet to new lows. This resilience in the value of Coinbase stock suggests its overall strength and stability.
Europe clears first Bitcoin ETF, as U.S. is likely to follow
After experiencing significant delays, Europe's inaugural spot Bitcoin exchange-traded fund (ETF) is finally preparing to make its debut later this year. Jacobi Asset Management, a multi-asset investment platform based in London, initially planned to launch its Bitcoin ETF on the Euronext Amsterdam exchange in July 2022.
According to the asset manager, there has been a gradual shift in demand compared to 2022, prompting them to move forward with the ETF now. Distinguishing itself from the conventional exchange-traded notes (ETNs) that typically characterize crypto-backed financial instruments in Europe, the Jacobi Bitcoin ETF is a centrally cleared instrument with custody supported by Fidelity Digital Assets. This marks a significant departure from the prevailing ETN structure commonly used in the region.
Meanwhile, the Chairman of the U.S. Securities and Exchange Commission (SEC) has expressed support for the approval of spot Bitcoin exchange-traded funds (ETFs) in the United States.
The SEC has accepted the application submitted by asset manager BlackRock for a spot Bitcoin ETF, marking a crucial milestone towards the potential launch of the first spot Bitcoin ETF in the country. This decision comes after BlackRock filed an amended application for a Bitcoin ETF in late June. Initially, SEC officials had concerns about the original ETF applications from BlackRock and other asset managers, citing a lack of comprehensive information.
To address these concerns and gain regulatory approval, BlackRock has included a "surveillance-sharing" agreement with leading U.S. cryptocurrency exchange Coinbase in its updated application. Competitors such as Ark Invest, Fidelity Investments, and others are also making similar amendments to their Bitcoin ETF applications.
On July 14, the SEC further added the Bitcoin ETF applications from WisdomTree, VanEck, Fidelity, and Invesco Galaxy to its docket, indicating a growing interest and activity in pursuing Bitcoin ETFs among various market players.
What I’m Reading This Week 📚
How a Vast Demographic Shift Will Reshape the World
The world’s demographics have already been transformed. Europe is shrinking. China is shrinking, with India, a much younger country, overtaking it this year as the world’s most populous nation.
But what we’ve seen so far is just the beginning.
The projections are reliable, and stark: By 2050, people age 65 and older will make up nearly 40 percent of the population in some parts of East Asia and Europe. That’s almost twice the share of older adults in Florida, America’s retirement capital. Extraordinary numbers of retirees will be dependent on a shrinking number of working-age people to support them.
In all of recorded history, no country has ever been as old as these nations are expected to get.
…Soon, the best-balanced work forces will mostly be in South and Southeast Asia, Africa and the Middle East, according to U.N. projections.
This Week By the Numbers 📈
The markets rallied this week as U.S. inflation “fell” to 3%. It is important to note that this number indicates how much inflation is increasing, not the rate of the underlying inflation.
The inflation figure the government reported Wednesday was down sharply from a 4% annual rate in May, though still above the Fed’s 2% target rate. Over the past 12 months, gas prices have dropped, grocery costs have risen more slowly, and used cars have become less expensive, even though the underlying prices have remained elevated.
The Fed is likely to increase interest rates again when it meets on July 25-26.
Traditional markets continued to recover this week, while Coinbase stock rallied post Ripple ruling, up 211% YTD.
Deal of the Week 💰
This week I’m investing in a hospitality concept in Santa Monica.
Led by Winston House and the Waterfront founders, the team is developing a new 9000 sq ft, ~270 seat concept on Main Street. The venue will include a vinyl speakeasy in the back, as well as a piano/Jazz bar, patio and a full restaurant in the front.
I’m very “jazzed” about this one (pun intended!). Please reach out to me directly if you are interested in learning more about this investment opportunity.
Top Stories 🗞️
Tesla’s board will return $735 million in stock and cash to settle claims directors were grossly overpaid
The directors — including Oracle Corp. founder Larry Ellison; James Murdoch, son of media mogul Rupert Murdoch; and Musk’s brother, Kimbal Musk — agreed to hand over the stock grants and cash for already exercised options, along with making corporate-governance changes to the way board-level compensation issues are reviewed, according to court filings. The Tesla directors denied wrongdoing as part of the accord, but said they agreed to settle the case “to eliminate the uncertainty, risk, burden, and expense of further litigation,” according to the July 14 filing in Delaware Chancery Court. A Michigan-based pension fund filed the case against the carmaker’s board in 2020. Delaware Chancery Court Chief Judge Kathaleen St. J. McCormick still must approve the deal for it to become final.
Redoubling support for war-stricken Ukraine is the "single best" way to aid the global economy, US Treasury Secretary Janet Yellen said Sunday, along with boosting emerging economies and tackling debt distress. Yellen also said on the sidelines of a G20 finance ministers' summit in India she would "push back" on criticism there was a tradeoff between aid to Ukraine and developing nations. "Ending this war is first and foremost a moral imperative," she told reporters in Gandhinagar. "But it's also the single best thing we can do for the global economy." Russia's invasion of Ukraine, both global breadbaskets that together exported almost a quarter of the world's wheat supply, triggered shockwaves in economies worldwide by sending prices for food and fuel shooting up.
BlackRock CEO Larry Fink has delivered fresh remarks supporting cryptocurrencies’ role in democratizing investing worldwide, pointing to growing interest among the company’s clients in digital assets. “More and more of our global investors are asking us about crypto,” Fink said during an interview with CNBC’s Squawk on the Street on July 14. BlackRock is the world’s largest asset manager, with over $8 trillion in assets spanning all types of investment products. In Fink's view, cryptocurrencies have a “differentiating value versus other asset classes” in helping diversify portfolios. “It’s so international it’s going to transcend any one currency,” noted the executive.
India has signed an agreement with the United Arab Emirates that will allow it to settle trade in rupees instead of dollars, boosting India's efforts to cut transaction costs by eliminating dollar conversions. During a visit by India's Prime Minister Narendra Modi to the UAE on Saturday, the two countries also agreed to set up a real-time payment link to facilitate easier cross-border money transfers. The two agreements will enable "seamless cross-border transactions and payments, and foster greater economic cooperation", said a statement from the Reserve Bank of India on Saturday. India, the world's third biggest oil importer and consumer and whose central bank last year announced a framework for settling global trade in rupees, currently pays for UAE oil in dollars. Bilateral trade between the two countries was $84.5 billion in the year from April 2022 to March 2023.
As the 2024 presidential election heats up, Republicans vying for the White House are preparing to face off during the first GOP primary debate on Aug. 23 in Milwaukee.
How it works: Candidates must poll at least 1% in three national polls or 1% in two national polls and 1% from an early state poll from two “carve out” states recognized by the committee. Candidates must also have a minimum of 40,000 unique donors part of their presidential campaign committee - with at least 200 unique donors per state - and sign a pledge agreeing to support the eventual party nominee.
Here are the candidates who are on track to qualify for the first debate: Donald Trump, Ron DeSantis, Nikki Haley, Vivek Ramaswamy, Tim Scott, Chris Christie
Here are the candidates still working on qualifying: Mike Pence, Will Hurd, Doug Burgum, Asa Hutchinson, Ryan Binkley, Francis Suarez, Larry Elder
Thank you for reading this week’s edition of the Myth of Money.🚀
Until next week,
About the Author: Tatiana Koffman
Hi there and thanks for reading! If you stumble upon my newsletter, you will notice that I write about money, economics, and technology. I hold a JD/MBA and spent my career in Capital Markets working across Mergers & Acquisitions, Derivatives, Venture Capital, and Cryptocurrencies. I write to make financial topics more accessible and create equal opportunity for the next generation of investors. I have personally invested in 20+ companies and funds (👉 my portfolio).