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July 25, 2023

Ripple; UK NFT hub; US crypto regulation

Welcome to Swarm Markets’ media memo. This weekly update provides comments from Swarm Markets’ co-founder,  Timo Lehes, on key industry news that has caught our eye, plus our own developments.

Comments available on the following news items:


  • Ripple EU/UK-bound after court win 
  • UK-driven NFT renaissance is a real possibility 
  • US regulatory ‘progress’ doesn’t mask the disarray

Ripple is heading to Europe after its SEC court win 


Not long after its high-profile victory in court against SEC charges, Ripple has made clear its future lies in Europe and the UK. Not only was this suggested by its MD for Europe, Sendi Young, in an interview with DL News but the company announced it has applied for an FCA crypto licence. The revelation is perhaps unsurprising in the wake of the bruising battle, but underpins a wider trend driven by regulatory flight.


It is also not the only example of regulatory migration we’ve seen from crypto in recent months. There is a clear undercurrent of businesses moving toward EU-centric models as they look for clear regulatory pathways to follow. 


The events of 2022 live long in the memory, and the responsible actors left behind in the wake of debacles such as FTX have called straightforwardly for a clear framework within which to work, recognizing just how essential this is to the future success and security of the market and its participants.


The EU and the UK are now really beginning to provide this, with their competing legislation. It is no wonder that the sectors look set to thrive in these regions in this context.


UK could drive NFT revival with ownership rights


NFTs exploded onto the crypto scene around two years ago now, but after extraordinary high profile sales and collections made the news, the market has gone totally flat, with a collapse in demand leaving some well-known NFTs selling for fractions of their original price. 


But some interesting legal developments that have quietly taken place in the UK leave it potentially well placed to lead on an NFT revival. In June, the UK’s Law Commission set out its recommendations for how these kinds of digital assets should be treated from a legal perspective. The result could provide groundbreaking ownership rights and protections for the market and risk reduction for participants. 


This has big implications for digital assets well beyond NFTs (especially of the cartoonish flavor). Digital assets of all kinds still exist in troubling middle grounds legally speaking in many countries. The UK has long been a destination for international wealth because property rights are well enforced through the courts, and the inclusion of digital assets into this could be a significant development that other regions might soon need to catch up on. 


Last week, the UK Government also rejected Treasury Committee recommendations that crypto be classified and regulated as gambling. The affirmation from the Government that it wants to treat the sector as a serious financial entity is highly encouraging. Calling crypto gambling would have been a facile conclusion. Instead it looks to the sector to innovate, and through existing financial regulations, it is well placed to do so. 


The US crypto regulatory mess isn’t improving


Lawmakers in the US are generating headlines with the introduction of fresh oversight bills for crypto and digital assets. Meanwhile the Financial Services Committee is looking to provide more regulatory clarity on crypto and stablecoins.


These separate but similar movements with the US lawmaking sphere are in some ways testament to the fractious and decentralized process of lawmaking in the US, where power is not wielded evenly and horse trading takes on many runners and riders for the ultimate authority on any given issue. 


But it also points to a deeper lack of direction from the country on the issue, and leaves it looking paralyzed while other parts of the world get their skates on. The lack of direction has opened the way for regulators to try and use existing powers to go after certain projects, but as the Ripple example now suggests, this isn’t foolproof from a regulatory perspective.


The intervention of the FSC to try and steer progress and clarify where the law is going is welcome, but until some real banner legislation is driven forward the market will continue guessing what will happen next. Leadership seems to be lacking from the White House and in the breach innovators will look to other regions for security instead.