SEC vs. Ripple Lawsuit Update: Key Developments This Week

Economic

Summary:

Stay informed on the latest updates in the SEC vs. Ripple lawsuit. Discover the implications for cryptocurrency regulation, Ripple's defense strategies, and potential outcomes as the case progresses this week.

The ongoing legal battle between the U.S. Securities and Exchange Commission (SEC) and Ripple Labs has reached a critical juncture this week, with significant developments that could shape the future of cryptocurrency regulation. The lawsuit, initiated in December 2020, alleges that Ripple conducted an unregistered securities offering through the sale of its cryptocurrency, XRP, raising over $1.3 billion. This article delves into the latest updates from the SEC vs. Ripple lawsuit and the implications for the cryptocurrency landscape.

Background of the Lawsuit

The SEC's lawsuit against Ripple Labs, its CEO Brad Garlinghouse, and co-founder Chris Larsen stems from allegations that the company sold XRP as an unregistered security. The SEC contends that Ripple failed to register its offerings, violating federal securities laws. Ripple, on the other hand, argues that XRP should not be classified as a security, emphasizing its utility and currency-like characteristics.

Key Developments This Week

Court Schedule Update

Magistrate Judge Sarah Netburn has established a timeline for the ongoing lawsuit, focusing on Ripple's motion to dismiss the SEC's latest expert evidence related to penalties. The SEC has been granted an extension until April 29, 2024, to file its counterarguments, while Ripple will have three business days to respond. This procedural update indicates that the case is moving toward a resolution, with both parties preparing for the next phase of litigation.

Ripple's Defense Strategy

Ripple has consistently maintained that its On-Demand Liquidity (ODL) sales do not constitute investment contracts. The company argues that XRP is used primarily for facilitating cross-border payments, rather than for investment purposes. Ripple's legal team is pushing back against the SEC's demand for substantial civil penalties, proposing a maximum penalty of $10 million, significantly lower than the SEC's earlier demand of $2 billion.

Judicial Insights

Judge Netburn's previous comments in the case have been favorable to Ripple, as she has recognized the utility of XRP and its distinction from other cryptocurrencies like Bitcoin and Ether. This perspective may influence the court's final decision regarding the classification of XRP and the potential penalties imposed on Ripple.

Implications for the Cryptocurrency Industry

The outcome of the SEC vs. Ripple lawsuit is poised to have far-reaching consequences for the cryptocurrency industry. A ruling in favor of Ripple could set a precedent that influences how cryptocurrencies are classified and regulated in the future. Conversely, if the SEC prevails, it may lead to stricter regulations for cryptocurrency offerings and increased scrutiny of blockchain projects.

Future Considerations

As the case progresses, industry experts are closely monitoring the developments. Predictions suggest that a resolution could be reached by summer 2024, with potential settlement discussions on the horizon. Ripple's representatives have indicated that they are prepared to defend their position vigorously, emphasizing the lack of evidence supporting the SEC's claims of future violations.

Conclusion

The SEC vs. Ripple lawsuit remains a pivotal case in the realm of cryptocurrency regulation. With critical court proceedings unfolding this week, the outcome could redefine the legal landscape for digital assets. Investors, industry participants, and regulators alike are watching closely as the case approaches its conclusion, highlighting the ongoing tension between innovation in the cryptocurrency space and regulatory oversight. As the legal battle continues, the implications for Ripple, XRP, and the broader cryptocurrency market will be significant and far-reaching.

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Samantha Luan

Economic

Investors have fallen over each other in recent weeks to buy the yen on bets that interest rates are finally about to tip in Japan’s favor. They face a moment of truth as soon as Wednesday.

The currency is holding onto an advance of about 5% against the dollar since just before it began surging on July 11, in a move that was amplified by suspected intervention by Japan. Some investors warn that the rally is fragile, as was on show overnight when the yen rapidly retraced gains after stronger-than-expected US economic growth figures.

Swaps markets suggest a 38% chance of the Bank of Japan hiking rates by 15 basis points by the conclusion of its July 31 policy meeting, indicating plenty of caution. And only 30% of BOJ watchers surveyed by Bloomberg forecast a hike, even if more than 90% see it as risk.

That leaves yen bulls vulnerable, particularly if the BOJ also disappoints expectations for a sizable cut in bond purchases, or if the Federal Reserve later in the day does anything to damp hopes for rate cuts in the US in coming months.

“This is a crazy yen rally,” said Nick Twidale of ATFX Global Markets, who has traded Japan’s currency for a quarter of a century. “The BOJ could be party poopers and not play their part in tightening policy.”

‘Crazy’ Yen Rally Is at Risk of Shattering as Soon as Next Week_1

Twidale said that if the BOJ underwhelms the market, carry trades that have kept the yen weak “may come back with a vengeance.”

Others from BlackRock Inc. to former central bank officials are predicting the BOJ will stand pat on interest rates for longer.

Patchy economic data lend credence to this view: while a key gauge tracking the strength of Japan’s service sector rebounded in July, a measure of factory activity showed a contraction. Weak consumer spending is further complicating the BOJ’s decision next week, people familiar with the matter say.

“If BOJ does nothing, the dollar-yen rate could surge again,” said Amir Anvarzadeh, strategist at Asymmetric Advisors who has tracked Japanese markets for over three decades.

The yen swung between small gains and losses Friday. It was little changed at 153.96 per dollar at 10:15 a.m. in Tokyo, after inflation figures for Tokyo earlier showed that consumer prices accelerated for a third month.

Nathan Swami, managing director of FX trading at Citigroup Inc. in Singapore, saw additional demand for bullish yen options after the outsized move this week.

“It is still too early to tell if this signals a longer-term investor sentiment shift, and may thus more likely be a tactical shift in short-term positioning or hedging activities for now,” he said.

According to other traders, some hedge funds remained on the sidelines amid uncertainty over how much the currency could gain ahead of next week’s BOJ policy meeting.

If the BOJ “doesn’t fully deliver,” then the yen could weaken toward the 158 level against the dollar, according to National Australia Bank Ltd.’s Rodrigo Catril.

Yet even if the BOJ does tighten policy on Wednesday, there is still a case for it to retain favor in carry trades, in which investors take advantage of Japan’s ultra-low interest rates to borrow in yen to then invest in currencies with higher yields.

The yen’s implied yields would still be about 90 basis points lower after a hike than those for the Swiss franc, which is an alternative funding currency for carry trades.

‘Crazy’ Yen Rally Is at Risk of Shattering as Soon as Next Week_2

US rates risk also abound. Should the odds of Fed rate cuts retreat, Japan’s currency could come under attack once more.

“The yen can test 160 if the Fed doesn’t signal a September rate cut and US data starts to strengthen again,” said Charu Chanana, head of currency strategy at Saxo Capital Markets.

Source:Bloomberg

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FastBull Featured

Daily News

[Quick Facts]

1. Tokyo core CPI rises 2.2% YoY in July, meeting expectations.

2. U.S. economy continues to grow strongly by 2.8% in Q2.

4. Fed seen to hold rates steady in July and start cuts in September.

3. Nagel says ECB should be able to cut rates if data stay on course.

5. U.S. Durable goods orders unexpectedly plummet.

[News Details]

Tokyo core CPI rises 2.2% YoY in July, meeting expectations

Data released on Friday showed that Tokyo core CPI rose 2.2% in July from a year earlier, accelerating for the third consecutive month. The market now maintains expectations of a rate hike by the Bank of Japan (BOJ) in the near future.

The "core-core" CPI, which excludes both fresh food and energy costs and is closely watched by the BOJ as a key gauge of broader inflation trends, increased by 1.5% year-on-year in July, following a 1.8% rise in June.

Tokyo inflation data is considered a leading indicator of national inflation trends. Bank of Japan Governor Kazuo Ueda has said the central bank will raise interest rates from their current near-zero level if underlying inflation, which takes the CPI and broader price indicators into account, accelerates toward 2% as expected.

U.S. economy continues to grow strongly by 2.8% in Q2

Gross-domestic product (GDP) expanded by a 2.8% seasonally- and inflation-adjusted annual rate in the second quarter, easily surpassing the 2.1% estimate in a survey of Wall Street Journal economists, expectations, according to data from the U.S. Commerce Department on Thursday.

Real GDP growth primarily reflected increases in consumer spending, private inventory investment, and nonresidential fixed investment. The increase in consumer spending reflected increases in both services and goods. Within services, the leading contributors were health care, housing and utilities, and recreation services. Within goods, the leading contributors were motor vehicles and parts, recreational goods and vehicles, furnishings and durable household equipment, and gasoline and other energy goods.

The increase in private inventory investment primarily reflected increases in wholesale trade and retail trade industries that were partly offset by a decrease in mining, utilities, and construction industries. Within nonresidential fixed investment, increases in equipment and intellectual property products were partly offset by a decrease in structures. The increase in imports was led by capital goods, excluding automotive.

Although in many ways the U.S. economy is performing well even with high interest rates while the pace of inflation has slowed, many Americans are unhappy that prices for groceries, automobiles, and homes are much higher than they were a few years ago. Although recession predictions have receded, there are still signs of weakness in the economy, and the job market has begun to slow down, with employers adding jobs at a slower pace in the second quarter than in the first quarter. Consumers are also facing growing headwinds from elevated borrowing costs.

Fed seen to hold rates steady in July and start cuts in September

Federal Reserve policymakers are expected to leave interest rates unchanged at 5.25%-5.50% next week and start cutting rates by 25 basis points in September, after the latest data showed the U.S. economy regained momentum last quarter. Before the data were released, traders expected a 9% chance of the Fed cutting rates next week, but that probability fell to less than 7% after a government report showed the economy grew by 2.8% last quarter, faster than expected and twice the rate of growth in the first quarter. The re-acceleration of the economy "should help ease concerns about the economy's ability to sustain the expansion and quell rumors that the Fed will need to cut rates in July."

Traders continue to expect the Fed to cut interest rates by 25 basis points each in September, November and December, while they reduced bets on further rate cuts by the Fed. Prior to this, traders bet on a 21% likelihood that the Fed would cut rates by more than 25 basis points before the September meeting, which is now down to about 15%.

Nagel says ECB should be able to cut rates if data stay on course

The European Central Bank (ECB) should be able to lower borrowing costs if economic data don't deliver a negative surprise, ECB Governing Council member Joachim Nagel said on Thursday. Monetary policy should be within a restrictive range until inflation reaches a stable level of 2%. Policy decision will be made on a meeting-by-meeting basis, without pre-commitment to what might happen in September. Wage conditions in the Eurozone continue to be "very strong" and the path for inflation down back to 2% will be "bumpy".

U.S. Durable goods orders unexpectedly plummet

U.S. durable goods orders fell 6.6% to $264.5 billion in June from the previous month, marking the first decline after four consecutive months of gains, according to data released by the U.S. Commerce Department. It was the biggest drop since January 2024, well below expectations of 0.3% and the reading of 0.1% in May. Transportation and capital goods orders fell the most in June, with non-defense aircraft and parts orders seeing the biggest drop.

[Today's Focus]

UTC+8 20:30 U.S. PCE YoY (Jun)

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Alex

Economic

Germany's two-year debt yield reached its lowest point since February on Thursday, influenced by weak economic data that led investors to anticipate quicker European Central Bank monetary easing. Although Euro area borrowing costs partially rebounded after U.S. data showed stronger economic growth, lower inflation supported expectations for a Federal Reserve rate cut in September.

'U.S. figures will quiet some voices calling for a cut as early as next week,' said Colin Finlayson, investment manager at Aegon Asset Management. The markets have fully priced in a Fed rate cut for September. U.S. Treasury yields fell on Thursday as a drop in equities drove safe-haven buying of bonds.

Economic data from the euro zone painted a less favorable picture, with the German Ifo Institute reporting a drop in its business climate index to 87.0 in July from 88.6 in June, against an expected 88.9. Additionally, euro zone business activity stagnated as revealed in a recent survey. German short-dated bond yields have decreased while long-dated yields saw a minor fall, making the yield curve its least inverted in six months.

Germany's two-year yield, which is sensitive to policy rate expectations, dropped 3.5 basis points to 2.69%, hitting a low of 2.365% earlier, its lowest level since February. The decline continued over the last three trading sessions due to weak economic data from both sides of the Atlantic. The euro zone benchmark 10-year Bund yield fell by 3 basis points to 2.41%, while the spread between the two rose to -26.5 basis points after a previous low of -23.3 basis points, its least inverted since January.

Money markets have fully priced in 50 basis points of ECB rate cuts with less than a 10% probability of a third easing move by year-end, expecting the easing cycle to conclude around summer 2025 with an ECB deposit rate of approximately 2.5%. The current ECB deposit rate stands at 3.75%.

'Unfortunately for the ECB, the Ifo survey is less clearly deflationary than the PMIs yesterday,' noted Christian Schulz, deputy chief European economist at Citi. 'Hiring intentions fell sharply in the services sector and remained stable in manufacturing, indicating further labor market easing.' However, price expectations marginally rose in downstream services and retail trade industries. Meanwhile, the premium on French bonds climbed to 70 basis points, and further to 71.70 basis points post France's inconclusive election and the far-left's proposal to reverse President Macron's pension reform.

Source：Devdiscourse

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Samantha Luan

Economic

Stocks

U.S. stock markets tried to steady from their epic one-day shakeout before giving it up late in the day, amid jitters about AI earnings potential that deflated megacaps, and, thus, the whole market on Wednesday.

The S&P 500 and Nasdaq rallied during the session, but closed down 0.5% and 0.9% respectively. The Dow Jones Industrial Average hung on to close 0.2% higher and small-cap stocks also rose as investors sought out value away from the megacaps.

Tesla was the only one of the so-called Magnificent 7 stocks to climb out of its hole, ending 1.7% higher after losing more than 12% Wednesday. Alphabet, Apple, Amazon, Meta and Microsoft all fell, with earnings reports looming next week, as did AI leader Nvidia, which reports later in August.

Some relief came from GDP data showing the U.S. economy grew surprisingly fast in the second quarter, with less inflation, giving the Fed scope to ease this year with little fear of overheating.

Stocks Not Out of The Woods After Trying to Recover_1

Still, investors want to see what Friday's June Personal Consumption Expenditure Price Index shows as the Fed's favorite inflation reading, days before the Federal Open Market Committee meeting next week. There seems little chance of a U.S. cut this month, but markets are confident that a pivot away from restrictive monetary policy will come in September.

The question: Is the selloff a bull market pullback or a bearish turning point? Given the recent string of record highs, indexes looked priced for perfection, which was not realized in the results from Alphabet and Tesla that precipitated the steepest percentage drop in the S&P 500 and Nasdaq since late 2022.

Uncertainty is a prominent theme ahead of the U.S. elections after President Joe Biden scrubbed his campaign and handed the baton to Vice President Kamala Harris, who has almost pulled even in early polls with Republican Donald Trump. Stocks Not Out of The Woods After Trying to Recover_2

Stocks Not Out of The Woods After Trying to Recover_2

Volatility has picked up across markets, according to the CBOE Market Volatility Index, the bond market's ICE BofA Merrill Lynch MOVE Index and currency market's Deutschebank dollar currency vol index.

It doesn't help that the Bank of Japan and the Fed hold meetings almost simultaneously next week. China's economy is slowing faster than economists and Beijing anticipated, with spillover into commodity markets and across Asia.

The Japanese yen rallied for a fourth straight session against the dollar on Thursday, hitting a 2-1/2-month high, as investors unwound their long-running bets against the currency ahead of those meetings. Dollar/yen was at 153.845 in late trade, just about flat.

Chinese stocks fell, iron ore and oil prices were shaky after the country's central bank sprang a surprise cut in longer-term interest rates, only stoking further worries about the world's second-largest economy and Asian markets overall.

The Shanghai Composite index closed at the lowest level since Feb. 19. MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.00% lower, while Japan's Nikkei is coming off a 3.28% tumble.

"In China it's not really a function of the cost of capital, it's a function of demand (for) capital which is causing economic weakness over there, which is why you had a really tepid response from Chinese equities," said Jeff Schulze, Head of economic and market strategy ClearBridge Investments.

Here are key developments that could provide more direction to markets on Tuesday:

- Japan Tokyo CPI (July)

- Singapore Manufacturing output (June)

- U.S. Personal Consumption Expenditures Price Index (June)

Source: Reuters

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Cohen

Economic

Economic activity in the U.S. was considerably stronger than expected during the second quarter, boosted by a strong consumer, government spending and a sizeable inventory build, according to an initial estimate Thursday from the Commerce Department.

Real gross domestic product, a measure of all the goods and services produced during the April-through-June period, increased at a 2.8% annualized pace adjusted for seasonality and inflation. Economists surveyed by Dow Jones had been looking for growth of 2.1% following a 1.4% rise in the first quarter.

Consumer spending helped propel the growth number higher, as did contributions from private inventory investment and nonresidential fixed investment, according to the first of three estimates the department will provide.

U.S. Economy Grew At A 2.8% Pace In The Second Quarter, Much More Than Expected_1

Personal consumption expenditures, the main proxy in the Bureau of Economic Analysis report for consumer activity, increased 2.3% for the quarter, up from the 1.5% acceleration in Q1. Both services and goods spending saw solid increases for the quarter.

Inventories also were a significant contributor, adding 0.82 percentage point to the total gain. Government spending added a tailwind as well, rising 3.9% at the federal level, including a 5.2% surge in defense outlays.

On the downside, imports, which subtract from GDP, jumped 6.9%, the biggest quarterly rise since Q1 of 2022. Exports were up just 2%.

Stock market futures drifted higher following the report while Treasury yields moved lower.

“The composition of growth was one of the better mixes that we have observed in some time,” said Joseph Brusuelas, chief economist at RSM. The report “tends to support the idea that the American economy is in the midst of a productivity boom which over the medium term will lift living standards across the country via lower inflation, low employment and rising real wages.”

There was some good news on the inflation front: the personal consumption expenditures price index, a key measure for the Federal Reserve, increased 2.6% for the quarter, down from the 3.4% move in Q1. Excluding food and energy, core PCE prices, which the Fed focuses on even more as a longer-term inflation indicator, were up 2.9%, compared to a 3.7% increase in the prior period.

The so-called chain-weighted price index, which takes into account changes in consumer behavior, increased 2.3% for the quarter, below the 2.6% estimate.

Treasury Secretary Janet Yellen saw the GDP report as “affirming the path we’re on to steady growth and declining inflation,” in remarks she delivered Thursday morning in Rio de Janeiro.

One other key variable, final sales to private domestic purchasers, which the Fed considers a good indicator of underlying demand, accelerated at a 2.6% pace, the same as in the prior quarter.

However, the report also indicated that the personal savings rate continues to decelerate, at 3.5% for the quarter, compared with 3.8% in Q1.

There have been signs of cracks lately in the consumer picture.

A report Wednesday from the Philadelphia Federal Reserve showed credit card delinquencies at an all-time high according to data going back to 2012. Revolving debt balances also reached a new high even as banks reported tightening credit standards and declining new card originations.

However, retail sales numbers have continued to climb indicating that consumers are weathering the headwinds of high interest rates and persistent inflation.

There also is pressure in the housing market: Sales are declining while home prices continue to rise, putting stress on first-time homebuyers.

Federal Reserve officials are expected to hold interest rates steady when they meet next week, though market pricing is pointing to the first cut in four years in September. Policymakers have been circumspect about when they might start reducing rates, though recent comments indicate more of a willingness to start easing policy and most central bankers have said they see further increases as unlikely.

In other economic news Thursday, the Labor Department reported that initial jobless claims totaled 235,000 for the week ended July 20, down 10,000 from the previous week and exactly in line with the Dow Jones forecast. Continuing claims, which run a week behind, edged lower to 1.85 million.

Also, orders for durable goods — generally big-ticket items such as aircraft, appliances and computers — unexpectedly fell 6.6% in June, compared with the forecast for a 0.3% increase. However, excluding transportation, new orders increased 0.5%.

Source:CNBC

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Samantha Luan

Economic

Inflation in Tokyo accelerated for a third month in July, keeping the door open to a possible interest rate hike when the central bank’s policy board meets next week.

Consumer prices excluding fresh food rose 2.2% in the capital, versus 2.1% in June, the Internal Affairs Ministry reported Friday. The reading matched the consensus estimate. Energy prices drove the gains, with electricity prices rising 19.7% on year. Gains in prices for processed food slowed a tad. Hotel prices also grew at a slower pace as lodging subsidies were phased out a year earlier.

Tokyo’s figures are leading indicators for the national data due in August.

Tokyo Inflation Quickens, Keeping BOJ Hike Option in Play_1

The data will be carefully parsed by Bank of Japan officials as they continue to look for opportunities to normalize policy after years of aggressive easing. The figures come a day after data showed service prices among businesses in Japan jumped in June by the most in about 33 years.

At the same time, Friday’s figures appeared to show companies are struggling to pass on higher costs to customers due to weak consumer spending, according to Yoshiki Shinke, senior executive economist at Dai-Ichi Life Research Institute.

“Both a rate hike or no hike is possible at next week’s BOJ policy decision,” Shinke said. “Today’s data weren’t disappointing, but they also won’t be a factor to give them more confidence regarding the inflation trend. If I were to decide, I would wait to see more data.”

The BOJ is set to announce details of its plan to reduce debt buying at the July 31 conclusion of its two-day policy meeting. While only about 30% of BOJ watchers say authorities will hike interest rates at that meeting, more than 90% see the risk of such a move, according to a Bloomberg survey published earlier this week.

BOJ Governor Kazuo Ueda has repeatedly said the central bank is looking for signs that higher wages will spur consumption and kindle demand-led price growth that anchors inflation above its 2% target.

The core inflation reading got a lift from the end of government utility subsidies in June. Overall inflation gained 2.2%, compared with 2.3% in June, while inflation excluding fresh food and energy increased 1.5%, slowing from 1.8%.

The gauge for service prices may inject some caution into next week’s BOJ board discussions. The reading slowed to a 0.5% increase in July, compared with 0.9% in June.

In addition to detailing its bond operation plans, the central bank will update its forecasts for inflation and growth at the meeting. Currently it expects its benchmark price gauge to stay above its 2% target in the year ending in March before falling back below that level in the following fiscal year.

Recent data have shown weakness in consumption, which is complicating the BOJ’s decision over whether to raise interest rates, according to people familiar with the matter.

The BOJ expects spending to pick up at some point, strengthening demand-driven inflation. Prime Minister Fumio Kishida has touted a one-off tax rebate that started in June as a potential driver to help the country exit deflation once and for all.

The yen’s historic weakness is poised to add upward pressure on consumer inflation via higher imports of goods, energy and materials. Ueda has said he’s watching the impact of the yen on prices and growth as a potential factor to lead to policy changes.

The yen has given back some of its recent gains against the dollar after US gross domestic data were stronger than expected. Japan’s currency was trading around 153.60 Friday morning in Tokyo.