SEC Expands Binance Lawsuit: Implications for Crypto Market

Economic

Summary:

The SEC is amending its complaint against Binance, broadening its definition of securities. This move could have a significant impact on the crypto market, increasing regulatory uncertainty and potentially stifling innovation.

The U.S. Securities and Exchange Commission's (SEC) July 30, 2024, filing to amend its complaint against Binance and affiliated entities marks a significant escalation in the regulatory battle against the world's largest cryptocurrency exchange. The move comes after a court hearing raised questions about the sufficiency of the SEC's allegations concerning certain tokens.

The Implications of the Amended Complaint

The SEC's decision to modify its complaint has several key implications:

Expanded Definition of Securities: By focusing on "Third Party Crypto Asset Securities," the SEC is signaling a broader interpretation of what constitutes a security under securities law. This could have far-reaching consequences for the crypto industry, as it opens the door for classifying a wider range of digital assets as securities.

Delaying Legal Precedents: The SEC's strategy of amending the complaint avoids a premature court ruling on the specific classification of certain tokens. This tactic buys the agency time to gather more evidence and potentially strengthen its case.

Strengthened Regulatory Authority: The SEC's actions reinforce its stance as a primary regulator of the cryptocurrency industry. This assertion of authority could shape the regulatory landscape for years to come, potentially impacting how other cryptocurrencies are treated.

Potential Impact on the Crypto Market

The SEC's move is likely to have a profound impact on the cryptocurrency market:

Market Volatility: Increased regulatory uncertainty can lead to heightened market volatility. Investors may become more cautious, affecting trading volumes and asset prices.

Regulatory Clarity (or Lack Thereof): While the amended complaint might provide some additional clarity on the SEC's stance, the overall regulatory landscape remains uncertain. This ambiguity can hinder investment and innovation within the crypto ecosystem.Innovation Challenges: A stringent regulatory environment can stifle innovation. Crypto projects and startups may face increased hurdles in developing new products and services.

Deeper Look into "Third Party Crypto Asset Securities"

The term "Third Party Crypto Asset Securities" is central to the SEC's amended complaint. While the exact definition remains to be fully clarified, it is likely to encompass digital assets issued by entities other than Binance itself. This could include a wide range of tokens, from utility tokens to platform tokens.

The SEC's focus on these assets suggests a potential shift in its regulatory approach. Instead of targeting specific cryptocurrencies, the agency may be aiming to establish a broader framework for classifying digital assets based on their economic characteristics.

Beyond Binance: Industry-Wide Implications

The SEC's actions against Binance have a ripple effect on the entire cryptocurrency industry. Other exchanges and platforms are closely watching the case, as it could set precedents for how they are regulated.

Moreover, the SEC's aggressive stance highlights the need for a comprehensive regulatory framework for digital assets. Industry stakeholders, policymakers, and regulators must work together to create a balanced approach that fosters innovation while protecting investors.

Conclusion

The SEC's amended complaint against Binance is a pivotal moment for the cryptocurrency industry. The outcome of this case will have far-reaching implications for how digital assets are regulated in the United States and beyond. As the legal battle unfolds, it is essential for market participants to stay informed and adapt to the evolving regulatory landscape.

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Risk Warnings and Disclaimers

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Glendon

Economic

This week, the cryptocurrency community has been abuzz with discussions about the potential introduction of an XRP ETF (Exchange-Traded Fund). This development comes as Ripple, the company behind XRP, continues to make strides in the financial technology sector and seeks to expand its reach in traditional investment markets.

The concept of an XRP ETF is gaining traction as part of a broader trend of cryptocurrency-based ETFs entering the market. While Bitcoin ETFs have already made their debut, the introduction of an XRP ETF would represent a significant milestone for altcoins and could potentially reshape the investment landscape for Ripple's digital asset.

Current Market Context

Before delving into the specifics of the XRP ETF, it's important to understand the current market context for XRP. As of July 2024, XRP has been showing signs of recovery and growth. The asset has rallied 2% in the last 24 hours and 0.8% over the previous week, although it still shows some red in the 14-day and monthly charts. This recovery is part of a broader market trend, potentially influenced by investors re-entering spot Bitcoin ETFs and favorable events surrounding Ethereum.

The XRP ETF Token

The introduction of the XRP ETF Token represents a significant development in Ripple's strategy. This new token is designed to enhance liquidity and provide new investment avenues for both institutional and retail investors. The primary goals of the XRP ETF Token include:

Providing a stable and regulated investment vehicle

Facilitating faster and more cost-effective transactions

Attracting institutional investors who may have been hesitant due to regulatory uncertainties

The XRP ETF Token aims to bridge the gap between traditional financial markets and the cryptocurrency world, potentially driving greater adoption of XRP's technology and services.

Potential Impact on XRP's Price and Adoption

The introduction of an XRP ETF could have several significant impacts:

Increased Liquidity: By providing a new, regulated investment vehicle, the XRP ETF could attract more investors, potentially increasing the overall liquidity of XRP.

Price Stability: ETFs typically provide more stability compared to direct cryptocurrency investments. This could lead to less volatility in XRP's price.

Mainstream Adoption: An ETF could make XRP more accessible to traditional investors, potentially driving wider adoption of the digital asset.

Regulatory Clarity: The approval and launch of an XRP ETF would likely require regulatory clearance, which could provide more clarity on XRP's regulatory status.

Challenges and Considerations

Despite the potential benefits, there are several challenges and considerations surrounding the XRP ETF:

Regulatory Hurdles: The ongoing SEC vs. Ripple lawsuit remains a significant barrier. The resolution of this case could greatly impact the feasibility and timeline of an XRP ETF.

Market Competition: With Bitcoin ETFs already in the market and other cryptocurrencies vying for similar products, XRP will face competition in attracting investor interest.

Market Volatility: While an ETF could provide more stability, the underlying cryptocurrency market remains volatile, which could impact the ETF's performance.

Future Outlook

The future of the XRP ETF largely depends on regulatory developments and market conditions. If Ripple can successfully navigate its legal challenges and continue to demonstrate the utility of XRP in cross-border payments, an XRP ETF could become a reality.

Looking ahead, analysts foresee the potential for significant growth. Some predict that XRP could climb past $1 if it breaches the $0.65 resistance level. Moreover, large holders have been accumulating XRP, with their holdings reaching 85% of the total supply, indicating strong confidence in the asset's future.

In conclusion, the potential introduction of an XRP ETF represents a significant development in the cryptocurrency market. While challenges remain, particularly on the regulatory front, the XRP ETF could open new avenues for investment and potentially drive wider adoption of Ripple's digital asset. As always, investors should conduct thorough research and consider their risk tolerance before making investment decisions in this rapidly evolving market.

To stay updated on all economic events of today, please check out our Economic calendar

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Warren Takunda

Central Bank

Economic

Stock markets pulled out of tech-led tumble on Thursday, as attention turned to whether the European Central Bank would signal September as its next likely point to cut interest rates after sitting on its hands at its latest meeting.

It was a busy day all round.

Wall Street was hoping for a Nasdaq reboot after its worst day since December 2022 . Japan's yen wilted after scaling a six-week high, while both the bond markets and euro were hearing from Christine Lagarde after the ECB left its only-recently pruned rates untouched.

Given that its policymakers have not been pushing back against market expectations, BNP Paribas economist Luca Pennarola said that "barring any shocks" September was now their preferred date for the next rate cut.

His colleague Mariana Monteiro said it would be important to hear whether Thursday's decision - which was fully expected - was unanimous given an emerging divergence over a potentially spluttering economic recovery but also stubborn pockets of inflation.

"We are not pre-committing to a particular rate path," Lagarde said in her opening remarks.

Back in the FX market, the U.S. dollar was still loitering close to its weakest level in four months against a basket of currencies.

Comments from Federal Reserve officials have bolstered the case for September cut in the U.S. too. That in turn meant gold was perched near its recent record highs.

Wall Street futures were going up. Europe's STOXX 600 was to snap a three-session losing streak with carmaker stocks driving the benchmark index with a 1.8% rise.

One could argue that clean energy funds have done a very good job of cleaning out investors' pockets.

Tech was only fractionally higher though after a 4.4% slump on Wednesday - also its worst day since December 2022 - following a report that the U.S. was considering tighter curbs on exports of advanced semiconductor technology to China.

MSCI's broadest index of Asia-Pacific shares outside Japan has seen a sub-index of IT stocks drop 2.5% overnight. Tech-heavy South Korean shares slipped 1.5%, while Taiwan stocks fell 2%.

The yen's overnight strength and the sharp drop in chip stocks took Japan's Nikkei down more than 2%, although the yen came off in Europe after daily data showed little fresh evidence of intervention from authorities.

"This volatility spike is now leading to some broader risk reduction as investors worry about stretched positioning," said Ben Bennett, Asia-Pacific investment strategist at Legal and General Investment Management.

ECB Set to Deliver a September Rate Cut_1

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Broader risk sentiment was also still jittery after Republican presidential candidate Donald Trump said on Wednesday Taiwan "did take about 100% of our chip business" and should pay the U.S. for its defence as it does not give the country anything.

China stocks had wavered as investors awaited policy news from a key leadership gathering in Beijing. The Shanghai Composite index made a late push to end up 0.55% although the tech sector still finished down.

The dollar index , which measures the U.S. currency versus six peers, was 0.1% higher at 103.78, not far from the four-month low of 103.64 it touched on Wednesday.

Jobs data just out showed the number of Americans filing new applications for unemployment benefits rose more than expected last week, although there has been no material shift in the labor market it suggested.

The data is typically noisy in July anyway because of summer breaks and temporary factory closures.

The yen was last at 156, while the euro was hovering at $1.0930 as ECB chief started to speak in Frankfurt.

Bank of Japan data suggested Tokyo may have bought nearly 6 trillion yen last week to lift the frail yen away from the 38-year lows it has been rooted to since the start of the month.

The yen has dropped 9.5% against the dollar this year as the wide interest rate difference between the U.S. and Japan weigh, creating a lucrative trading opportunity, in which traders borrow the yen at low rates to invest in dollar-priced assets for a higher return, known as carry trade.

Analysts, however, said last week's suspected moves by Tokyo might lead to traders unwinding some of their positions.

"It feels like the tide is shifting a little here and it's generating some discomfort for yen funded carry traders," said James Athey fixed income portfolio manager at Marlborough Investment Management.

In commodities, gold was 0.5% higher at $2,469 per ounce just below the record high of $2,483.60 it touched on Wednesday.

Oil prices were on the rise again, with Brent futures 0.4% higher at $85.45 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 0.7% to $83.43.

Source: Reuters

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Warren Takunda

Cryptocurrency

Bitcoin could jump to $110,000 on its next major rally, despite concerns of “lower highs and lower lows” forming as a pattern on the BTC price chart, according to crypto traders.

“The next leg is likely to bring Bitcoin to $110K,” founder of MN Capital Michael van de Poppe wrote in a July 17 post on X. It comes while other traders point out that Bitcoin is failing to reach previous highs, with each new high falling short of the last.

“It should be noted that the sequence of lower highs and lower lows continues despite the halving, despite the ETF, despite the hype,” veteran trader and analyst Peter Brandt stated in a July 17 post on X. Bitcoin’s Next Leg Could Hit $110K, Despite ‘Lower Highs and Lower Lows’_1

Bitcoin’s Next Leg Could Hit $110K, Despite ‘Lower Highs and Lower Lows’_1

Source: Peter Brandt

Van de Poppe doesn’t seem as concerned, linking the volatile price of Bitcoin in recent times to the struggles faced by Bitcoin miners due to the rising operational costs and reduced mining rewards following the halving in April.

“The true hashrate drawdown at its last low on July 1st was as HEAVY as during the FTX collapse,” Van de Poppe stated.

Since Bitcoin reached its all-time high of $73,679 on March 13, it has breached the $71,000 mark several times but has yet to reach its record price again.

There were also nine consecutive days in July when Bitcoin failed to breach above $60,000, which hadn’t happened since Feb. 28. Bitcoin’s recent low of $54,274 on July 5 was the lowest price the asset faced in four months, according to CoinMarketCap. Bitcoin’s Next Leg Could Hit $110K, Despite ‘Lower Highs and Lower Lows’_2

Bitcoin’s Next Leg Could Hit $110K, Despite ‘Lower Highs and Lower Lows’_2

Bitcoin is down 1.65% over the past 30 days. Source: CoinMarketCap

However, Brandt said he was “impressed” by Bitcoin’s recent price rebound which saw it falter then recover back to critical support within a two-week period, reaching $65,735 on July 17.

While “the next leg” has an ambiguous timeline, other analysts are offering slightly more certainty regarding when Bitcoin will breach the $100,000 mark.

Riot Platforms vice president of research Pierre Rochard believes it could happen at some point before July 2025. “Bitcoin could go to $100,000 over the next 12 months,” Rochard wrote in a July 17 X post.

Other traders are more conservative.

Crypto trader and investor Marco Johanning suggests Bitcoin will not go to $100,000, “at least not this time,” offering a prediction nearly 19% lower.

“The new low at 53.4k changes the targets for Bitcoin to 81k or 94k,” he added.

Source: Cointelegrah

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Devin

Economic

In what must now seem like Germany's halcyon days of 2015, then chancellor, Angela Merkel told a press conference in Berlin "I am happy that Germany has become a country that many people abroad associate with hope." It was a statement recognising Germany's commitment to those seeking asylum and the additional $6.7bn needed to accommodate the system during the height of the migrant crisis.

How heavily those words must weigh on her successor, Olaf Scholz, and indeed, on his compatriot and President of the European Commission, Ursula von der Leyen, in 2024. While Germany may still hold the hopes of migrants in its hands as applications rose to 2015 levels last year, hope must be in short supply in its halls of power. For Germany as an economic power and figurehead of the EU finds itself somewhat beleaguered these days. Long have the Germans been the adults in the room, shouldering the responsibility not just for a nation but the EU too.

As Merkel herself said in the same speech, helping others "is something very valuable, especially in view of our history." And it is perhaps towards history that Germany must now turn in order to find a path forwards out of its current slump.

By the end of the Second World War, Germany was, in essence, a ruined state with much of its population displaced and malnourished, its buildings destroyed and its economic infrastructure collapsed. It became known as Germany's 'Stunde Null' or 'Zero Hour,' a blank slate as it were, a place from which everything would have to be built anew. Its people seemed to be facing a bleak and uncertain future, but by the time the Berlin Wall fell in 1989, Germany had the third largest economy in the world, and still holds onto its top three position today. The country needed a miracle in order to recover and it got one.

According to Eichengreen and Ritschl in their LSE working paper Understanding West German Economic Growth in the 1950s, the country's remarkable turnaround reflected its "convergence to the productivity frontier, a process during which investment and growth were higher than normal."

The effect was so pronounced that the Germans coined a word for it: 'Wirtschaftswunder' or 'economic miracle.' In reality, regaining control over inflation, as well as efficient labour practices, was what helped to create the conditions needed for productivity. But productivity relies on industry and industry requires energy, in all its forms.

Energy independence

During a recent speech to the German Chambers of Industry and Commerce, Reuter's reported Scholz saying "the German economy has faced unprecedented challenges over the past two years or so since Russia's invasion of Ukraine."

Germany's over-reliance on relatively cheap Russian energy was just one of several major problems it has needed to address in recent years. Out of the G7 economies, Germany's was the only one to shrink last year, with an aging workforce and underinvestment counted among the reasons why.Germany's economic advisors have cut growth projections for 2024 to 0.2 percent. In the last quarter of 2023, the economy shrank 0.5 percent. As the IMF reports: "with this cheap gas no longer available, the German manufacturing model does not work anymore," and as of last year, Germany's manufacturing sector has slipped into recession.

A new deal was brokered with Qatar in 2022 for two million tons of liquefied natural gas (LNG) each year starting from 2026, but this alone is not enough to solve Germany's energy crisis. Markus Krebber, the head of RWE, a German multinational energy company, said in a recent interview: "the root cause for our problems is that Germany did not invest enough money into the electricity supply system for many years." In order to achieve this, investment and expansion in renewables must be a priority. Krebber goes on to say, "Germany, with its energy-intensive industries, should have started to take action in this regard 10 years ago or even earlier."

From this perspective the way forward seems to be: invest in renewables, the lights stay on in the factories and everything else falls into place. But is it that simple? Unfortunately not.

According to the IMF some of Germany's problems are temporary and some are structural, but wholesale gas prices are now back to 2018 levels, so while energy will always be a factor in production costs and overall competitiveness, it is not the only factor.

A temporary issue such as higher inflation has caused consumers to hit pause on purchases and in order to counteract inflation, the ECB raised interest rates, which in turn caused depression in interest-sensitive areas such as construction. The more fundamental structural issues are productivity growth and an aging workforce (see Fig 1).

Making more market miracles

The German economic miracle following the end of the Second World War was achieved via the introduction of the 'soziale Marktwirtschaft' or 'social market economy,' which finely balances free-market capitalism with social policy. Germany's remarkable recovery from the ravages of war was forged in a liberal market economy and returning growth to productivity now could also benefit from less government interference and a 'Goldilocks zone' of regulation that balances fair competition and the welfare state.

In terms of the workforce, the IMF also believes that "over the next five years, the growth rate of Germany's labour force will drop by more than in any other G7 country." This, they say, is a result of baby boomers retiring and the current migrant wave coming to an end. Solving this issue could be achieved by raising immigration levels, but regulating immigration is an incredibly difficult balance to strike, as Scholz says himself in an interview with Der Spiegel in October last year.

"We must be firm in cases where someone does not have a right to stay. But at the same time, we have to be open and modern, because we need workers from other countries."

The chancellor is well aware that Germany needs more workers and more immigration: "Around 13 million citizens of Germany – affectionately referred to as the baby boomers – will soon be heading into retirement. That is why we need factory workers, engineers, doctors, care workers."

In fact it is clear from his Der Spiegel interview that the chancellor recognises the maladies of Germany's structural issues and how to treat them, but the world is a changed place, made evident by the rise in popularity of right-wing populist parties such as Germany's AfD, who are in direct opposition to Scholz's Social Democratic Party (SPD).

The task ahead of Scholz is not for the faint of heart and I believe that this has as much to do with addressing Germany's temporary and structural issues as it does with handling the insecurities and anxieties of Europe's citizens. Kicking off the EU election campaign in Hamburg in April, Scholz rallied behind the SPD with the mantra: "we need hope." We sure do.

Source: World Finance

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Warren Takunda

Economic

Europe's traders were trying to pull stock markets out of tech-led tumble on Thursday, as attention turned to whether the European Central Bank would signal September is its next likely point to cut interest rates.

It was already a busy day.

Japan's yen had scaled a six-week high amid speculation of an sustained intervention, while the equity markets were still shaky after chipmaker tariff worries gave the Nasdaq its worst day since December 2022 on Wednesday.

Bond markets were broadly steady and at $1.0930 the euro was holding near a four-month peak against an unusually subdued dollar ahead of the ECB meeting where the questions were all on when it cuts next.

Given that the bank's policymakers have not been pushing back against current market expectations, BNP Paribas economist Luca Pennarola said "barring any shocks" September was their preferred date for the next rate cut.

His colleague Mariana Monteiro said it would be important to hear whether Thursday's decision - in which rates are expected to be kept unchanged - will be unanimous given an emerging divergence over a potentially spluttering economic recovery but also stubborn pockets of inflation.

Back in the FX market, the U.S. dollar was loitering close to its weakest level in four months against a basket of currencies.

An administration in November that could be directly hostile to clean energy.

Comments from Federal Reserve officials have bolstered the case for September cut in the U.S. That in turn meant gold was perched near its recent record highs.

European stocks were battling to stay positive with the STOXX 600 on track to snap a three-session losing streak. Oil and gas boosted the benchmark index with a 1% rise, as the sector tracked higher crude prices.

Tech was 0.75% lower again after a 4.4% slump on Wednesday - also its worst day since December 2022 - following a report that the United States was considering tighter curbs on exports of advanced semiconductor technology to China.

MSCI's broadest index of Asia-Pacific shares outside Japan has seen a sub-index of IT stocks drop 2.5% overnight. Tech-heavy South Korean shares slipped 1.5%, while Taiwan stocks fell 2%.

The yen's strength and the sharp drop in chip stocks took Japan's Nikkei down more than 2%.

TAKE, TAKE, TAKE

Broader risk sentiment also took a hit after Republican presidential candidate Donald Trump said on Wednesday Taiwan "did take about 100% of our chip business" and should pay the U.S. for its defence as it does not give the country anything.

The dollar index , which measures the U.S. currency versus six peers, was 0.1% higher at 103.78, not far from the four-month low of 103.64 it touched on Wednesday.

The yen hit a six-week high against the dollar at 155.375 in early trading after a sharp rise on Wednesday that had traders suspecting Japanese authorities were once again in the market supporting the currency. It was last at 156.

Bank of Japan data suggested Tokyo may have bought nearly 6 trillion yen last week to lift the frail yen away from the 38-year lows it has been rooted to since the start of the month.

Analysts, however, said last week's suspected moves by Tokyo might lead to traders unwinding some of their positions.

In commodities, gold was 0.5% higher at $2,469 per ounce just below the record high of $2,483.60 it touched on Wednesday.

Oil prices were on the rise again, with Brent futures 0.4% higher at $85.45 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 0.7% to $83.43.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

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FXOpen

Forex

The currency pairs AUD/USD and USD/CAD, unlike the pairs with the Euro, Yen, and Sterling, continue to demonstrate long-term stability. These pairs have been trading in narrow price corridors for several months. Given the weakening of the dollar in many directions, there is a high likelihood of increased volatility and a breakout from the flat channels in commodity currencies.

USD/CAD

Last week, the USD/CAD pair sharply rebounded from the significant support at 1.3600, forming a bullish "hammer" pattern. Technical analysis of the pair suggests a potential resumption of the upward movement if the buyers manage to consolidate above 1.3700. It is worth noting that the price is testing this level for the second time this week. The inability of dollar bulls to overcome this resistance could push the price back to 1.3600-1.3580.

The upcoming trading sessions will be packed with important events and macroeconomic indicators:

Today at 15:30 (GMT +3) the Philadelphia Fed Manufacturing Index (USA);
Today at 15:30 (GMT +3) the initial jobless claims in the USA;
Tomorrow at 15:30 (GMT +3) the core retail sales index in Canada.

AUD/USD

Following the release of inflation data in the USA, the AUD/USD currency pair managed to move above the significant range of 0.6700-0.6680. Buyers of the Australian Dollars have not yet managed to develop a full-fledged upward trend, but if the 0.6700 level remains as support, the price could continue its upward movement towards 0.6850-0.6800. If the price consolidates below 0.6680, it could return to the range of 0.6630-0.6580.

The volatility of AUD/USD could be influenced by speeches from Federal Reserve representatives in the upcoming trading sessions:

Today at 20:45 (GMT +3) a speech by the Dallas Federal Reserve President Lorie Logan;
Tomorrow at 19:45 (GMT +3) a speech by Federal Open Market Committee (FOMC) member Raphael Bostic.

Commodity Currencies in Stable Ranges: Should We Expect a Breakout?_2

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