What happened this week around blockchain and cryptocurrencies? The most relevant local and international events as well as appealing background reports in a pointed and compact weekly review.
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At Christmas 2020, the US Securities and Exchange Commission (SEC) filed a lawsuit against Ripple, marking its largest crypto case to date. The SEC alleged that Ripple had offered an unregistered security to US customers through the public sale of its cryptocurrency XRP. After three years and approximately $200 million in legal costs, the first judgment has been reached, with a New York district court ruling that the XRP token itself does not meet the requirements of the Howey Test, thus not classifying the public distribution of the cryptocurrency as a securities offering. However, the offering to institutional investors could potentially meet the requirements, resulting in a partial victory for Ripple. Beyond this specific case, the ruling provides initial judicial guidance on applying the Howey Test to digital assets and is expected to set a significant precedent for industry regulation in due course.
The cryptocurrency markets interpreted the Ripple case verdict as a major victory for the industry, leading to a temporary surge in the XRP token’s value, trading over 100% higher within hours. Other “altcoins” – alternative cryptocurrencies – also benefited significantly from the decision. Over the past few months, the Securities and Exchange Commission (SEC) has classified over 15 tokens as unregistered securities. Thanks to Ripple’s partial victory, these projects now have a better chance of defending themselves against the SEC. Solana (SOL), Cardano (ADA), Polygon (MATIC), as well as shares of the cryptocurrency exchange Coinbase (COIN), witnessed daily increases of 25%.
In recent years, there has been a gradual integration of digital assets into the traditional financial world. Major US financial giants such as BlackRock, Fidelity, JP Morgan, as well as European traditional institutions like Deutsche Bank, have been positioning themselves through their own offerings. In Switzerland, established banks are approaching this new asset class more cautiously. Various private and cantonal banks are laying the foundation for their involvement by providing training and workshops internally and through external providers. Therefore, engagement from Swiss financial institutions can be observed, albeit in a different form than overseas.
“Web 3.0” has become a prominent buzzword in the tech and crypto industry in recent years. The term refers to the vision of a decentralized internet that empowers individuals and replaces intermediaries through blockchain technology. Web 3.0 encompasses the development of decentralized applications (dApps), digital currencies, and smart contracts, enabling higher transparency and user control over their data and digital assets. According to the EU Commission, Web 3.0 is considered a precursor to “Web4,” which involves artificial intelligence-based Internet of Things (IoT), trusted blockchain transactions, virtual worlds, and extensive XR capabilities (encompassing augmented reality, virtual reality, and mixed reality). Web 4.0 aims for a complete fusion of the digital and physical worlds.
In addition: the slogan “Code is Law” is often embraced in the blockchain industry. The expression describes the idea that in decentralized systems, the underlying code automatically enforces the applicable rules and regulations, rendering traditional legal oversight unnecessary. However, a court case against a hacker of a DeFi protocol demonstrates that law enforcement agencies hold a different view. Shakeeb Ahmed, a 34-year-old developer, exploited a vulnerability in the public software of the decentralized exchange Crema Finance to steal $9 million in user funds. Now, he faces up to 20 years in prison, as the US prosecutors’ lawsuit includes charges of wire fraud and money laundering.