SEC’s Gensler both ‘pleased’ and ‘disappointed’ by Ripple crypto ruling

By Yahoo Finance July 18, 2023 In Ripple

Securities and Exchange Commission Chair Gary Gensler said Monday that his agency is both pleased and disappointed with a court ruling that Ripple Labs’s XRP token was not necessarily a security, but implied that crypto exchanges aren’t off the hook for complying with SEC regulations.

“There’s ongoing litigation with a number of these crypto platforms and these platforms are commingling a number of services that you’ve seen on these crypto platforms where they could well be trading against their customers, bundling up a bunch of services that we would not allow in any other parts of our capital markets,” Gensler told Yahoo Finance in an exclusive interview.

FILE - U.S. Securities and Exchange Commission Chairman Gary Gensler testifies during a House Financial Services Committee hearing on oversight of the SEC, April 18, 2023, on Capitol Hill in Washington. Two lawsuits filed by the U.S. Securities and Exchange Commission against the world’s biggest cryptocurrency exchanges, Binance and Coinbase, have reopened tensions between the government and a volatile industry that has been marred by scandals and market meltdowns. (AP Photo/Jacquelyn Martin, File)

The interview was his first since a judge ruled last Thursday that the XRP token issued by Ripple was a security when sold to institutional investors but not to the general public. The SEC sued Ripple in 2020, alleging that the sale of XRP was an unregistered securities offering.

The judge’s reasoning was that the institutional investors “would have purchased XRP with the expectation that they would derive profits from Ripple’s efforts.”

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Gensler says the agency is “pleased” with the part of the decision ruling that the token was a security when sold to institutional investors but “disappointed in other aspects about retail investors.”

“In terms of the decision,” he added, “we’re still taking a look at it.”

The risks of AI

Gensler also warned Monday about the risks posed by artificial intelligence, noting that a limited number of companies control much of that technology. If one of them were to run into trouble, that could threaten the stability of the financial system.

“AI may heighten financial fragility as it could promote herding with individual actors making similar decisions because they are getting the same signal from a base model or data aggregator,” he said. “It also could exacerbate the inherent network interconnectedness of the global financial system.”

That includes lawsuits against Coinbase (), the largest crypto exchange in the US, and , the world’s largest digital currency exchange.

A number of digital currencies surged on the news, including bitcoin (), which reached its highest levels since May 2022.

“We’ve carefully reviewed our analysis,” Coinbase chief legal officer Paul Grewal on Twitter. “It’s time to relist.”

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