Five Things to Know in Crypto This Week: SEC Plans an Appeal

Key Insights:

• The crypto market and the NASDAQ Composite Index saw similar losses from Monday to Friday but for different reasons.
• SEC plans to appeal the SEC v Ripple ruling that made XRP a security sometimes.
• US Republican Party members introduced more crypto legislation, irking the anti-crypto Democrats.

Crypto Market on Track for a Second Weekly Loss in Six Weeks

It was a range-bound Monday to Friday for the crypto market. Hopes of an SEC settlement in the SEC v Ripple case faded as the week progressed. On Friday, news hit the wires of SEC plans to appeal the SEC v Ripple Court ruling.

Uncertainty over the SEC approving one, some, or all of the spot BTC ETFs added to the cautious mood.

However, the crypto market continued to brush aside China and US economic indicators and US corporate earnings despite the influences on the NASDAQ Composite Index and the broader global equity markets.

This week, the focus turned to the US economy this week. US retail sales and US jobless claims supported market bets on a US soft landing. However, disappointing GDP numbers from China and US corporate earnings weighed on market risk sentiment.

Notably, Netflix (NFLX) and Tesla (TSLA) contributed to a NASDAQ reversal in the second half of the week. In contrast to previous earnings seasons, the crypto market brushed aside the results and forward guidance.

In the week ending July 21, the NASDAQ Composite Index fell by 0.57% to 14,033. The crypto market fell by 0.77% to $1,164 billion, Monday to Friday.

XRP on Target for a Weekly Gain Despite SEC Appeal Noise

It was an important week for Ripple and XRP, with regulators, the crypto community, and investors responding further to Judge Torres’s SEC v Ripple case ruling.

This week, the SEC broke the silence on appealing the ruling. The SEC Chair had alluded to an appeal on Monday before the news hit the wires of the SEC planning an appeal.

On Friday, defense attorney James Filan shared a WSJ article and the SEC pleading in the Terraform Labs/Do Kwon case, saying,

“In the SEC v Terraform Labs/Do Kwon case, the SEC has filed a pleading discussing Judge Torres’s decision in SEC v Ripple in which it states that SEC staff is considering the various available avenues for further review and intends to recommend that the SEC seek such review. SEC Says XRP Ruling Was Wrong, Signals It Will Appeal.”

For the XRP Community and the US digital asset space, an appeal could take years. Importantly an appeal would leave the US digital asset space in a precarious position.

Monday through Saturday morning, XRP was up 2.69% to $0.7679, outmuscling the NASDAQ Composite Index and the broader crypto market.

US Lawmakers Signal a Tough Road Ahead on Crypto Legislation

On Thursday, the House Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development Chairman Dusty Johnson, Financial Services Subcommittee on Digital Assets Chairman French Hill, and Agriculture Committee Chairman Glenn “GT” Thompson introduced legislation to provide the digital asset space clarity and consistency.

The bill aims to deliver clear guidelines, allowing digital asset developers to innovate and advance currency by adhering to the rules without the ever-present threat of lawsuits from regulators.

The Financial Innovation and Technology (FIT) for the 21st Century Act provides much-a needed structure for the Commodity Futures Trading Commission (CFTC) and the SEC.

However, Democratic Party members of the House Committee on Agriculture had a different view on the Financial Innovation and Technology for the 21st Century Act, saying,

“Instead of focusing on pressing Farm Bill issues, House Republicans are sprinting to provide a handout to crypto exchanges, Wall Street, and Silicon Valley venture capitalists at the expense of American consumers and retail investors.”

A lack of support from both sides of the aisle could allow the SEC to pursue its regulation by enforcement mantra. However, the Lummis-Gillibrand Responsible Financial Innovation Act will go through different channels and may face fewer roadblocks.

Spot BTC Exchange Trade Fund Applications Face Uphill Battle

Hopes of the SEC approving one, some, or all of the spot BTC exchange-traded fund applications faded this week. On Wednesday, the NASDAQ (NDAQ) u-turned on plans to offer crypto custody services, citing US regulatory risk.

The Court ruling on the SEC v Ripple case may also incense SEC Chair Gary Gensler and the SEC. The loss to Ripple could compel the SEC to decline the applications in the interest of investor protection.

Ironically, the SEC could cite the Court ruling and its plans to appeal as grounds to decline the applications. The SEC could request resubmission once there is greater clarity on the classification of cryptos as securities and commodities.

However, US lawmakers may have to provide a framework through legislation, which looks unlikely for now.

Crypto-Related Crime Sinks in H1 2023

This month, Chainalysis released the latest crypto-crime statistics. It was good news for the digital asset space.

According to the mid-year report,

• Crypto inflows to illicit entities, not including inflows to entities that have been sanctioned or subject to special measures, are down 65% to where they were at the same time in 2022.
• Inflows to risky entities, made up primarily of mixers and high-risk exchanges) are down 42%.
• Declines for legitimate services were less significant, with inflows down 28%.
• While trading volumes have declined as the crypto market recovers from the 2022 sell-off, illicit transaction volume is falling much more than legitimate transaction volumes.

Scams accounted for the lion’s share of the slide in illicit inflows, falling $3.3 billion. In contrast, ransomware was the only category to record an increase in inflows, up $175.78 million.