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You've got mail 📮 from the SEC?
Ripple and SEC's Hinman emails drama. Republicans continue to defend crypto. Crypto outflows $417M over 8 weeks. FPG halts withdrawals after cyber attack. FPG halts withdrawals after cyber attack.
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You've Got Mail ... from the SEC?
Ripple got its hands on the sacred scriptures - I mean emails - of William Hinman, the former SEC director.
Remember that 2018 speech by former Securities and Exchange Commission (SEC) director William Hinman, where he boldly declared Ethereum as not a security? Well, the plot thickens as the much-awaited emails surrounding this speech have finally been released.
Did these digital missives contain the "gotcha" moment Ripple was hoping for in their lawsuit against the SEC?
🔙 Context here
Ripple's lawyers have been fighting tooth and nail to get their hands on these emails since their lawsuit began in December 2020. The SEC initially took legal action against Ripple back in December 2020, alleging that the sale of XRP represented an unregistered securities offering.
Since then, Ripple has vehemently denied that XRP is a security, arguing that it doesn't meet the criteria of the famous Howey test. The lawsuit has been a rollercoaster ride, with top Ripple executives eagerly anticipating its conclusion. However, pro-XRP lawyer John Deaton recently claimed that the presiding Judge Analisa Torres would likely make a final decision before September 30 of this year.
📬 Unboxing Hinman's inbox
The emails revealed a flurry of activity leading up to Hinman's speech at the Yahoo Finance All Markets Summit, on June 14, 2018, discussing the fate of different digital assets. Staffers and Hinman himself went back and forth, tweaking the speech, debating the SEC's stance on crypto regulation, and even brainstorming some "witty and snappy" titles.
The final punch? "When Howey Met Gary."
Everyone was eagerly anticipating Hinman's stance on Bitcoin and Ethereum, hoping these emails would prove the SEC favored the two crypto-giants.
In his final speech, Hinman delivered a slightly altered version of his drafts, adding his views on disclosure requirements.
"As with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value," Hinman declared.
While the legal value of these emails may be questionable, they do shed light on the SEC's controversial actions against crypto.
😱 Ripple Labs CEO takes the stage
Ripple Labs CEO Brad Garlinghouse didn't hold back, expressing his outrage. His beef? Hinman going ahead with his speech, despite internal pushback, and then the SEC having the audacity to sue Ripple Labs.
🧩 Piecing together the puzzle
From a May 24 draft where Hinman voiced his belief that federal securities laws didn't apply to Bitcoin or Ether, to a June 13 comment where a staffer cautioned against ruling Bitcoin out as a security, the emails were a rollercoaster of opinions.
There was even an intriguing tidbit about a meeting with Ethereum co-founder Vitalik Buterin and the Ethereum Foundation, following which Hinman confirmed that Ether was not a security.
Alderoty view 👇
Ripple's legal superhero, Stuart Alderoty, wearing his defender-of-justice cape, firmly stated that unelected bureaucrats should stick to applying the law, not making up new ones. He boldly declared that Hinman's speech should be banned from serious discussions about token securities.
Apparently, Hinman boldly claimed that Ether was not a security because it had magically become "sufficiently decentralised. Alderoty, armed with these documents, accused Hinman of spouting made-up analysis with no legal basis whatsoever. It ended up sending the poor cryptocurrency industry into a state of utter confusion about what on earth qualifies as a security.
🏁 The Ripple effect
Now because of all this, XRP, the token everyone's been eyeing, took a bit of a tumble, dropping a whopping 8.5% in just one day. It was like a sudden slide at the cryptocurrency playground. XRP's price fell to a low of 46.18 cents, erasing all those gains it made earlier this month.
This happened as the entire digital asset market decided to join the sell-off party on Wednesday. BTC dropped below $25,000, while ETH took a dip below $1,700, hitting three-month lows.
To add to the drama, the Federal Reserve's latest interest rate decision threw everyone in a loop. Even though the Fed paused its rate hike campaign after 14 months (which many traders thought would be bullish for prices), BTC and ETH still took a hit.
TTD Defend 🔛
Republicans are back at it, defending the crypto industry with all their might! In their latest move, the House Financial Services Committee leaders penned a letter to the SEC, demanding the withdrawal of their proposed rule to change the definition of "exchange."
These GOP warriors argue that the SEC's rule change will be a real buzzkill for innovation and harm not just digital asset market participants but the entire U.S. economy.
Now, let's dig into the specifics. The SEC's proposed rule wants to redefine the term "exchange" in the Securities Exchange Act to include systems that bring together buyers and sellers of securities using fancy non-firm trading interests and communications protocols. But, the Republicans say this goes beyond the SEC's authority and will shut down the digital asset ecosystem faster than a rodeo clown chasing a runaway bull. They claim it'll keep U.S. technological innovation in a corral instead of letting it roam free.
Crypto firms should start preparing for the European Union's new crypto laws, Markets in Crypto Assets (MiCA), now, even though they won't be applied until the end of next year, according to Chainalysis's head of policy for Europe.
"If you've got the MiCA license, you are complying; you're being verified," she said. "There are no standardised rules in any other part of the world."
MiCA is going to bring some shiny new obligations for crypto-asset providers and stablecoin issuers serving customers in the EU. Companies will have to apply for authorisation in their favorite EU member country. It's like picking your dream destination in the EU crypto realm. And it might take around four to five months to secure that MiCA license.
However, there would also be benefits to securing authorisation, including the ability to "passport" practices into other EU countries without further authorisation.
TTD Numbers 🔢
The crypto market is keeping us on our toes with outflows, inflows, and a dash of resilience.
According to CoinShares and their Digital Asset Fund Flows Report:
Over the course of 8 weeks, digital asset investment products experienced outflows of $417 Million.
Last week alone, outflows amounted to $88 Million.
Ether products saw the largest outflows in a single week since the Ethereum Merge in September 2022 - $36 Million.
Bitcoin investment products witnessed outflows of $52 Million during the same period.
Altcoins had a mixed experience. While Litecoin, XRP, and Solana enjoyed minor inflows, Polygon experienced outflows.
Altcoins have actually seen inflows overall this year (except Tron).
Geographically, most outflows came from North America - 87% concentrated within a single provider.
Switzerland saw some minor inflows of $9.2 Million, but Germany experienced outflows of $9.4 Million.
Despite regulatory pressures and concerns, the digital asset market has shown remarkable resilience, with the total crypto market cap maintaining its $1 trillion-plus status. It seems investors are diversifying their exposure to altcoins, even amidst regulatory crackdowns.
TTD Exploits ☸️
FPG Presses Pause Button
Crypto prime brokerage, Floating Point Group (FPG) had to hit the brakes on trading, deposits, and withdrawals due to a "cyber security incident."
The estimated loss from this cyber attack is a whopping $15 Million to $20 Million in cryptocurrencies.
FPG didn't waste any time and called in the experts—third-party forensics and law enforcement—right after discovering the incident. To keep things under control, FPG locked down third-party accounts and secured their wallets.
Hashflow's bumpy ride
Hashflow, the trading firm, is caught up in an ongoing exploit that has already snatched more than $600,000 in Ether and Arbitrum.
It's like a digital treasure hunt! The exploit seems to be centred around Hashflow's bridge contract. They built it to make cross-chain swaps smooth, but someone found a way to exploit it. The exploit took advantage of a vulnerability related to contract approvals.
PeckShield spotted the affected address, the Hashflow deployer address. They're keeping a close eye on things.
Hashflow hopped onto Twitter to reassure their users.
TTD Surfer 🏄
Bank of China's investment bank subsidiary, BOCI issues $28 Million worth of digital structured notes on the Ethereum blockchain.
Bitcoin nonprofit Brink has received $5 Million in funding from Jack Dorsey's Smart Small funding initiative.
Binance has applied to deregister in Cyprus after receiving a license in October 2022.
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The Token Dispatch is a daily newsletter that takes you on a 4-5 minute drive through the wild west of the Crypto World. Daily in your email inbox @13:00 GMT. Almost always.