SEC to disclose internal documents on Bitcoin and Ethereum

  • Ripple Labs has gained access to inside information from the US Securities and Exchange Commission (SEC) on the two largest cryptocurrencies in the world.
  • The SEC previously stated that Bitcoin and Ethereum are not considered securities.
  • The trial judge said the hearing was a “high stakes” for Ripple. 

Ripple Labs won a hearing in the case, as a result of which the SEC – the US Securities and Exchange Commission – is obliged to transfer its internal documents on bitcoin and ethereum. XRP price has risen 24% over the past 24 hours, trading at $ 0.93 at the time of writing.

SEC to disclose documents on Bitcoin and Ethereum

Earlier, former SEC chairman Jay Clayton and director Willian Hinman said that the SEC does not consider the two largest cryptocurrencies – bitcoin and ether – as securities. However, the Securities and Exchange Commission did not disclose how it came to this conclusion and believes it is beside the point.

Ripple is trying to find documents that refer to XRP as a “virtual currency” by the SEC, similar to Bitcoin and Ethereum. SEC internal documents may also specify criteria for determining which digital assets are and which are not considered securities, which can help the company to defend its position.

Last month, Ripple filed a petition for the SEC to provide documentation on Bitcoin and Ethereum, with the firm arguing that “with the correct Howey Test, the  economic nature of an XRP transaction is no different from a Bitcoin and Ethereum transaction.

However, during the hearing, Judge Sarah Netburn said:

“For nearly a decade, the SEC has watched the growth and development of XRP without giving any formal indication that its sale may be illegal.”

Judge Netburn said it was a “high stake” for Ripple as it ruled in favor of the defendant. She added that documents such as minutes of meetings and internal memos “expressing the agency’s interpretation or views” on cryptocurrency will be considered, but internal emails from employees will not be taken into account. 

Why is this question so important?

Lawyer  John Deaton , who led the  SEC intervention petition against Ripple for XRP holders, stressed the importance of the decision the prosecutor makes in the beginning, who and what to charge. Clayton preferred to target individual Ripple executives, not just the company. 

Deaton, familiar with the case, believed that if the SEC only sued Ripple, it would only be a strict liability case – where the securities regulator only needed to prove XRP was a security when Ripple sold it. 

However, with the SEC pursuing the two executives, the regulator must prove that Garlinghouse and Larsen “knew or recklessly ignored that registration was required to sell Ripple’s XRP.” 

Bitcoin and Ethereum are also relevant, as former Commodity Futures Trading Commission (CFTC) Chairman Chris Giancarlo wrote an article that says XRP is not a security, but a commodity. The current CFTC Chairman Heath Tarbert stated in January 2020 that:

We have stated very clearly about bitcoin: bitcoin is a commodity. We have not said anything about the broadcast – until now. As chairman of the CFTC, I believe that ether is a commodity.

Deaton said: “If the former CFTC chairman has affirmatively stated that XRP is a commodity and the current CFTC chairman has stated that ETH is officially a commodity, it is certainly reasonable to assume that XRP is not a security.”

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