Yesterday in Crypto - Issue #1

In celebration of our first issue, we’ve decided to make this letter “Last Week in Crypto” and cover everything you missed during the week of 7/10/2023.

Here are the headlines:

In the thrilling world of digital currencies a David and Goliath story has just reached a pivotal moment.

The SEC, the vigilant watchdog of the financial marketplace, had accused Ripple Labs, a Fin-Tech company that uses blockchain to achieve fast and cheap cross-border payments, of a regulatory misstep involving its digital currency, XRP. The SEC argued that XRP was a security, akin to a stock or bond, and should have been registered as such.

Ripple Labs, however, held its ground, asserting that XRP was a cryptocurrency, not a security. This set the stage for a high-stakes legal duel in the United States District Court in the Southern District of New York.

After a tense deliberation, Judge Analisa Torres delivered a game-changing verdict. She ruled that XRP was NOT a security when sold on digital asset exchanges, a significant win for Ripple Labs. Huge win, right?

The judge also declared that XRP IS in fact a security when sold to institutional investors, as it meets the criteria of the Howey Test, a standard used to determine if transactions qualify as "investment contracts."

In essence, this means that while XRP is not considered a security when traded on cryptocurrency exchanges, it must follow certain rules when sold to large, professional investors. This groundbreaking ruling not only marks a partial victory for Ripple Labs but also sheds light on the intricate landscape of cryptocurrency regulation. It's a thrilling chapter in the ongoing saga of digital currencies and a setback for the SEC and its current head, Gary Gensler.

Another legal storm is brewing in the murky waters of crypto. The central figure in this drama is Alex Mashinsky, the former CEO of the now-bankrupt crypto lender, Celsius. The stage is set, the players are in place, and the plot is thickening.

The U.S. Attorney for the Southern District of New York and the Federal Bureau of Investigation (FBI) have brought serious charges against Alex: securities fraud, commodities fraud, and wire fraud.

At the heart of the matter is the allegation that Mashinsky, while at the helm of Celsius, misled customers about the company's success, profitability, and the nature of the investments made with user funds. In essence, the authorities claim that Mashinsky painted a rosy picture of the company's financial health, while the reality was far from it.

But in this high-stakes game, not everything is as it seems. In a surprising twist, the authorities have reached a "non-prosecution agreement" with Celsius. This means that Celsius, despite its former CEO's alleged misdeeds, will not face prosecution. The company has agreed to accept responsibility for its role in the alleged fraudulent schemes.

Will Alex see jail time? Will Celsius users ever be made whole? Only time will tell.

Contrary to popular belief that the crypto industry is dwindling in the United States, a recent report by Galaxy Digital, a U.S.-based crypto investment firm, paints a different picture. The report reveals that U.S.-based crypto startups are not only surviving but thriving, attracting significant attention and investment from venture capital (VC) firms.

According to the report, more than 43% of all deals completed and over 45% of the capital invested by VC firms were directed towards U.S.-based crypto startups. These figures challenge the prevailing narrative of a dying crypto scene in the U.S., showcasing instead a robust and growing sector.

While the U.S. leads in this arena, the crypto industry's influence is not confined to its borders. The United Kingdom, Singapore, and South Korea are also making substantial progress, securing 7.7%, 5.7%, and 5.4% of capital investment, respectively.

Despite the perceived downturn and regulatory hurdles, the U.S. crypto scene is far from dead. The reality is, the crypto industry in the US appears to be a vibrant and evolving sector, with VC firms showing sustained interest in U.S.-based crypto startups. The narrative of a dying U.S. crypto scene… who could be pushing that, and why? Could it be that the people in power want to appear anti-crypto until they’ve acquired a large amount of cryptocurrencies, and then will suddenly change their tune when they realize that crypto can’t be stopped? I’ll leave that to you to decide.

Speaking of a changing tune, one of BTC’s biggest critics appears to be coming around to the technology.In the grand tapestry of the financial world, a new pattern is emerging. At the heart of this transformation is Larry Fink, the CEO of BlackRock. Fink has been a longstanding critic of crypto - he called bitcoin an “index of money-laundering” in 2017. He's now signaling a shift in the tides that could change the landscape of investing forever...

In an interview with CNBC, Fink spoke of a growing curiosity among gold investors about the role of cryptocurrencies. Over the past five years, he noted, "more and more" gold investors have been inquiring about the potential of digital currencies. He pointed to the impact of exchange-traded funds (ETFs) in democratizing access to gold and suggested they could have a similar effect on the crypto market.

Fink's words paint a picture of a world where the old and the new, gold and crypto, are not at odds but can coexist and even complement each other. He sees an international crypto product as a potential hedge against the fluctuations of the US dollar, offering investors a new tool in their financial arsenal.

This comes around the same time that Blackrock filed for a spot Bitcoin ETF.Fink is a smart man. Could it be that he was bullish on crypto the whole time, but chose the precise moment to change his public opinion?

In the grand theater of American politics, a new act is unfolding. The protagonist of our story is none other than Ron DeSantis, the Governor of Florida and a 2024 Presidential candidate. DeSantis making campaign waves with a bold promise that could reshape the future of digital currencies in the United States.

CBDCs are a type of digital currency that is issued and regulated by a country's central bank. They represent a new frontier in the world of finance, blending the digital innovation of cryptocurrencies with the stability and regulation of traditional currencies.

But DeSantis is not a fan. He's taken a stand against a digital dollar in the country. Speaking at the Family Leadership Summit, he made a promise that, if elected president, he would ban CBDCs in the U.S. His words echoed through the hall, "If I am the president, on day one, we will nix central bank digital currency. Done. Dead. Not happening in this country."

This bold declaration sends a clear message about DeSantis' stance on the future of digital currencies in the United States. He understands that giving the government more control over your money is anti-freedom and anti-American.

Regardless of your political stance, we must band together to reject Central Bank Digital Currencies and hold on to our freedoms. After all, freedom is what makes this country great, right?

That’s all for this week. If you’ve made it this far, I thank you. Expect shorter issues going forward. We’ll see you tomorrow.

“It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” - Henry Ford