The rising competition between Donald Trump and Kamala Harris over the support of the cryptocurrency industry initially sent the price of Bitcoin surging and reignited hopes of a crypto bull run—but the optimism was short lived. Global markets have once again injected volatility in Bitcoin and other digital assets along with stock market averages. The key difference between the S&P and crypto, however, is that token price volatility is not the best indicator of a technology or an industry only now emerging from its infancy.
Bitcoin’s current fluctuation tells a different story today than it might have several years ago. The crypto industry’s newly-found market acceptance and political maturity have sped up the technology’s regulatory clarity. Future value won’t be indicated by token prices, but rather the solutions these innovative companies provide with their coins’ utility.
Despite Bitcoin’s recent volatility, BlackRock's iShares Bitcoin Trust (IBIT), for example, continues to perform well. This ETF directly invests in Bitcoin, offering investors access to a digital asset commodity without the challenges of holding it directly. While most focus on Bitcoin’s price at a given moment, the token’s utility is as a store of value for the holder. Additionally, IBIT helps eliminate the logistical challenges of direct Bitcoin ownership, which include potentially high trading costs and tax reporting complexities.
Regardless of the price volatility of digital commodities, the “crypto moment” in utility is much closer than it was a year ago. The catalyst was Ripple’s landmark legal victory last July against the U.S. Securities and Exchange Commission. This case dealt a serious blow to the federal regulator’s attempt to gain authority over the asset space through the courts. The Southern District of New York’s ruling has ignited a more confident posture from the crypto industry—led in large part by Ripple.
The SEC sued Ripple and its senior executives, Brad Garlinghouse and Chris Larsen, in 2020 alleging their sales of the XRP token were a continuous, unregistered securities offering. The case against Ripple relied on the Commission’s very broad reading of securities law to argue that digital assets themselves are securities, even on secondary markets, giving the agency unlimited authority to regulate them. This was a high-risk litigation strategy that failed. Judge Analisa Torres ruled that the XRP token is not a security when sold over public exchanges to or between retail investors. It was viewed by the industry and crypto legal advocates as a game changer. In early August 2024, the court issued its judgement on remedies, solidifying that XRP and secondary market transactions are not securities, and imposing a $125 million civil penalty on the firm—an amount vastly less than the $2 billion the SEC initially sought.
Since the SEC dropped its case against the Ripple executives, Garlinghouse has been emboldened. The company became one of the leading funders of Fairshake, a crypto industry SuperPAC that quickly raised over $110 million to make their voice heard in the upcoming 2024 federal elections.
Between legal wins, market acceptance, and crypto’s burgeoning political legitimacy, lawmakers have begun to take notice. At the end of May, the U.S. House of Representatives passed FIT21, a bill establishing regulations for digital assets and the first major crypto bill to advance out of one of the chambers. It would move regulation of token trading more decisively into the commodity space and limit the SEC’s expansive “regulation by lawsuit” approach that has blunted the product offerings of companies like Ripple in the U.S.
A bill like FIT21 is the first step toward future regulatory clarity for the industry, which will provide a path for crypto and blockchain companies to innovate and eventually go public. Even before the bill passed the House, Ripple began investing heavily in building out its global business offerings beyond its cross-border payments solutions, where XRP provides on-demand settlement liquidity that has been embraced in Asia by banks like Japan’s SBI Holdings. Ripple also acquired Metaco, the Swiss digital asset custody company, and announced it would enter the U.S. stablecoin market to compete with leaders Circle and Tether.
Stablecoins are offered as retail products for customers to use over frictionless payment networks in place of cash, backed by an asset reserve to maintain a 1-1 value tied to the U.S. dollar. The origin of stablecoins dates to the advent of Bitcoin. Since its introduction in 2018, Circle’s stablecoin has been used to settle over $12 trillion in blockchain transactions. With a daily volume of more than 2 billion, USDC’s market capitalization is now over $33 billion. In 2019, J.P. Morgan launched a stablecoin as a tool for its clients to settle interbank transactions. With Ripple moving into this segment and having a client base of Asian financial services providers, free market competition will accelerate innovation in the payments sector.
The arrival of the “crypto moment” won’t be seen in speculation on digital token prices. Instead, regulatory clarity will facilitate growth in the sector. This will allow greater capital deployment and innovation for the underlying technology and its use cases.
When the time comes for lead adopters of blockchain such as Ripple or Circle launch initial public offerings, it will signal a changing of the guard and bring much better buy side value opportunities for investors than token prices on digital exchanges. And once they go public and crypto’s value is better defined, expect next-gen innovators to attract start-up capital to develop more value-add blockchain products for investors.
