Chainalysis Shares Insights After Digital Asset Markets React to SEC v. Ripple Ruling that XRP Exchange Sales Did Not Violate Securities Law

On July 13, 2023, the crypto and blockchain industry got “good news” when Judge Analisa Torres of the U.S. District Court for the Southern District of New York ruled that Ripple did “not violate securities law in selling its token (XRP) via public exchanges,” the team at Chainalysis wrote in a blog post.

Chainalysis also mentioned that this particular decision cuts against claims made by the US Securities and Exchange Commission (SEC) in both this suit and others “against crypto industry giants like Coinbase and Binance that most cryptocurrencies should be regulated as securities like stocks and bonds.”

Although the judge found that Ripple did “violate securities law in its sale of XRP to institutional investors, the ruling has given the industry hope that other cryptocurrencies deemed securities by the SEC in other cases may see similar rulings, and be allowed to continue to trade as normal on exchanges, without the risk of securities law violations by token issuers or the exchanges themselves,” the report from Chaianalysis added.

But given the number of other legal cases underway, as well as Congressional momentum on crypto legislation, there’s “still a lot to sort out,” the Chainalysis team acknowledged.

Even so, this ruling “made waves in the crypto world.”

Market reaction: Big moves for Ripple and other tokens “previously deemed securities”

First and foremost, we saw “a big jump in Ripple’s price and overall transaction volume.” Chainalysis also pointed out that Ripple’s XRP price “surged 87% … on news of its legal victory, reaching a one-year high of $0.88.” As of 1pm on July 14, its price sits at $0.72.

Chainalysis further noted that we can also see that XRP inflows and outflows from centralized exchanges “spiked just prior to and during the price jump, as many users apparently looked to trade on the good news.”

The report added that XRP isn’t the only token “affected by yesterday’s decision though.”

As noted in a blog post, the SEC had previously “named several other tokens as securities in separate lawsuits under a similar framework to the designation of Ripple.”

Many of those tokens also “saw large price increases as well, with users likely convinced the Ripple case bodes well for their own continued health and legality.”

Besides Bitcoin Cash, many other crypto tokens showed at least modest gains — but those gains “were significantly bigger for coins that have previously faced SEC scrutiny and been designated as securities in lawsuits brought by the regulatory agency.”
Similarly to XRP, many of those tokens (but not all) also “saw large increases in transaction volume,” the report added.

Chainalysis also pointed out that the outflows data “suggests that, similar to XRP, interest grew in trading assets whose SEC designation as securities is now in question.”

Finally, the decision also seems to have “sparked a large increase in DEX activity.”

In the hours following the Ripple decision, DEX traders “ratcheted up their activity significantly, with most of the extra volume driven by wETH and stablecoins.”

The market thinks “big things” are coming following the Ripple decision

As stated in the blog post, it remains to be seen “whether the Ripple decision will stand and how other tokens will be evaluated by regulators in the future.”

The report added that the data they analyzed “indicates that crypto users believe the Ripple decision is positive for the industry, as nearly all tokens are up and transaction volume has spiked.”

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