With the increasing adoption of blockchain technology and the rising demand for tokenized assets, the global digital securities market is expected to grow at a CAGR of over 35%.
This makes sense, given that blockchain technology enables the issuance of tamper-proof digital securities that can be easily traded on a decentralized exchange. This makes them an attractive investment option for both institutional and retail investors.
The rising demand for tokenized assets is another key factor driving the growth of the digital securities market. Tokenization allows for the fractional ownership of assets, which makes them more accessible to a broader range of investors.
With the increasing adoption of blockchain technology and the rising demand for tokenized assets, the digital securities market is expected to grow rapidly in the coming years.
However, the crypto regulatory landscape is ever-changing and complex. Businesses must keep up with the latest regulatory developments to ensure compliance. For instance, in the United States, the Securities and Exchange Commission (SEC) has taken a leading role in regulating cryptocurrencies and has brought enforcement actions against several businesses.
So, here’s what went down in the digital securities and crypto regulatory space this week.
Upstream Lists Multiple Digital Securities
Digital securities exchange Upstream announced the listing of two new digital securities on its exchange. These digital securities will be cross-listed on OTC Markets.
Creatd, Inc. (OTCQB: CRTD) is one of the companies that announced that it had started the application process to dual-list its shares on Upstream.
A creator-first company, Creatd aims to unlock creativity for and provide economic opportunities to creators and brands by “multiplying the impact of platforms, people, and technology.” This will be achieved through its four business divisions; Creatd Labs, Creatd Partners, Creatd Ventures, and Creatd Studios.
The listing is expected to facilitate access to a global, digital-first investor base that can trade using USDC stablecoins, USD, credit/debit cards, and PayPal, unlocking liquidity and enhancing price discovery. This opportunity to invest in Creatd comes ahead of its anticipated application to re-list on a national exchange.
“Upholding transparency is what will drive the next stage of evolution in the public markets. Upstream is uniquely leading this charge by combining the best available technology with enforcement practices that together work to protect and empower issuer and investor alike,” said CEO of Creatd, Jeremy Frommer.
This dual-listing is also part of Creatd’s “broader effort to realize the true value of our stock,” Frommer added, “Looking ahead, we are enthusiastic about the other potential opportunities to leverage Upstream, including its potential utility for the proposed spin-off of our OG Collection media library and other monetizable assets.”
The other one is iQSTEL, Inc. (OTCQX: IQST), which has also decided to list its shares on Upstream. iQSTEL is a telecommunications firm that operates in four divisions; Telecom, Fintech, Blockchain, and Electric Vehicles.
Earlier this week, iQSTEL announced that it had begun the application process for the dual listing on the trading app for digital securities and NFTs.
Part of Seychelles-based MERJ Exchange Limited, Upstream is powered by Horizen’s Ethereum-L2 matching engine technology. It aims to provide a marketplace for digital securities, tokenized SPACs, as well as U.S. & international equities, crowdfunded companies (private securities), and “celebrity ventures.”
Both Creatd and iQSTEL are micro-caps, having a market valuation of about $28 million to around $37 million, respectively. Given that both companies adhere to the required disclosures, Upstream listing is expected to be approved. The listing, however, is subject to MERJ approval.
LRBY Deemed a Digital Security
The US Securities and Exchange Commission (SEC) has won its case against the crypto start-up LBRY, Inc. The company behind the LBRY protocol, which is a blockchain-based file-sharing network, announced the ruling on Monday along with its published copy.
“We lost. Sorry everyone,” LBRY wrote on Twitter. “We’re going to lick our wounds for a little bit, but we’re not giving up.”
As a result of this ruling, the LBRY Credits token (LBC) has lost 38.5% of its value in the last 7-days, according to CoinGecko. Trading at $0.0122 at the time of writing, LBC is down 99.2% from its all-time high (ATH). On Nov 8, the token hit its all-time low at just under $0.00062.
LBRY was first charged with violating securities laws by the SEC for selling its LBRY Credit token (LBC) as unregistered securities in March 2021. But LBRY, of course, does not believe it is selling securities. The company countered that its LBC token “functions as a digital currency that is an essential component of the LBRY Blockchain.”
The company further said that the regulator did not give it fair notice of the LBC sale being subject to securities laws, which violates LBRY’s right to due process. U.S. District Judge Paul J. Barbado meanwhile wrote in the conclusion of the ruling, “Because no reasonable trier of fact could reject the SEC’s contention that LBRY offered LBC as a security, and LBRY does not have a triable defense that it lacked fair notice, the SEC is entitled to judgment.”
According to the ruling, LBRY’s case will not go to trial, but a “status conference” will be scheduled to settle further “any remaining issues” regarding the SEC vs. LBRY case.
“Going to allow myself one scream,” LBRY CEO Jeremy Kauffman tweeted before adding, “Alright, now back to work.”
LBRY isn’t completely done with this yet, but it believes the ruling could affect the entire crypto industry.
“The language used here sets an extraordinarily dangerous precedent that makes every cryptocurrency in the US a security, including Ethereum,” the company Tweeted in response to the SEC ruling.
CEO Kauffman, who is running for Senate in New Hampshire, reiterated LBRY’s views in an interview, saying this ruling shows the SEC is “out to damage or destroy the cryptocurrency industry in the United States.”
Some speculate that the ruling could also affect Ripple, which has been battling against the SEC since the end of 2020 for selling $1.3 billion in unregistered securities.
SEC Case Against Ripple looking ‘Fragile’
Digital asset manager CoinShares noted in its latest digital asset investment products report that “the SEC case against Ripple looks increasingly fragile,” as the XRP investment product saw inflows for the 3rd week totaling $1.1 million, “implying improving investor confidence.”
While XRP is attracting investor interest, the crypto king Bitcoin continued to see negative sentiment, recording outflows following a 7-week inflow and the FOMC raising interest rates by a further 75 basis points. Ethereum also recorded minor inflows totaling $2.7 million but after a 4-week run of outflows.
Ripple is gaining a lot of interest not only from investors but also from industry participants. Last week, several major players from the industry, including Coinbase and the Blockchain Association, filed amicus briefs in support of Ripple Labs, arguing that the securities laws have been inconsistently applied by the agency, creating “uncertainty” for the entire crypto industry.
“Ripple and others have been the subject of extensive enforcement scrutiny while others – with nearly identical products or services – have apparently been subject to none,” Coinbase’s filing said.
Other entities in support of Ripple include the Crypto Council for Innovation, the nonprofit organization Investor Choice Advocates Network, the crypto mobile app SpendTheBits, and the XRP “decentralized community.” There are, in total, 12 independent entities now pledging legal support for Ripple.
The case, however, can still take months to come to any conclusion, despite the ongoing support, according to Ripple CEO Brad Garlinghouse. He spoke at DC Fintech Week early in October. He did speculate the case would be wrapped up by the first half of 2023, but that’s just a guess.
The US District Court’s ruling in favor of the SEC against LBRY has some not feeling good about the Ripple case, with Jeremy Hogan, Partner at Hogan & Hogan, expecting the results of the LBRY case to “make its way into the SEC’s final brief in the Ripple case.”
Crypto lawyer John Deaton, however, is still bullish about Ripple’s chances of winning the case.
In a Nov 4 post, General Counsel for Ripple Stuart Alderoty also said that while “a dozen independent voices – companies, developers, exchanges, public interest and trade assoc’s, retail holders” are trying to explain how “dangerously wrong the SEC is,” the agency is neither listening nor engaging, rather is busy trying “to blindly bulldoze on.”
