This is a Quarterly Update Series. Q1s update can be found here.
Table of Contents
Dred Scott and XRP
Interoperability Update
Cosmos (ATOM)
Icon (ICX)
Polkadot (DOT)
Chainlink (LINK)
Eth Liquid Staking
Multichain CEO Arrested (probably)
Conclusion
Internal References
1. Dred Scott and XRP
In the formative years of the American experiment, this country was trying to discover its identity separate from the colonial powers that had settled and established this country. One of many legal questions they had to grapple with was “who is and is not a citizen?” This problem stemmed from the fact that the Constitution failed to address the existing institution of slavery. And this failure caused many legal problems in the future.
The law only operates based on precedent and existing legislation. A judge cannot create law, nor can they interpret words that are not already written in legislation. There are many who look back from modern times and will tell you that the Supreme Court messed up on their ruling of Dred Scott vs. Sandford. In this case, a slave by the name of Dred Scott traveled with his master through several states that had outlawed slavery. Scott’s claim was that since he had resided within free states for a period of over a decade he was in fact a free man as slavery did not exist within those states.
However, the Constitution had never mentioned slaves or slavery a single time, and when something is not mentioned in the Constitution, the 10th amendment determines that the powers not granted to the federal government nor restricted from the states are reserved to the states. This unfortunately meant that since slavery was never mentioned a federal court couldn’t over-rule the states unless the judges were to interpret language that wasn’t there.
The failure of legislation to state bare facts about the world that existed around it led to the inability of the court to accurately mete out justice when given the opportunity.
The court ruled that all people of African descent were not citizens and could not bring suit in court at all.
The famous abolitionist phrase “Am I not a Man,” rings awfully loud here. When the court is not given clear instructions about how to proceed it will often fail to find obvious truths hidden in plain sight. This is not a failing of the courts, it is a failing of the legislature itself.
In America, the legislature does not conceive of the possibility that people might wish to live within its borders while participating in commerce in a means that is not under the control of the legislature itself. Article 1, Section 8, Clause 5 of the Constitution states the following.
The Congress shall have the power to coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.
How could a court in the US ever come to recognize new money arising within its borders when the written legislation does not allow such a thing to occur? We sit here discussing Securities and Commodities when really the discussion should be how does money come to arise in any captured regime?
It can’t. The only way it will is if it is forced through violence or sheer cultural domination. The questions of citizenship in the Dred Scott case were never resolved until 620,000 men lost their lives fighting to answer it.
If we speak only from the perspective of securities or not, I would say that XRP is a Security and I don’t trust the team behind Ripple to have altruistic intentions to build a cathedral rather than simply enriching themselves. But if we are speaking in terms of money, neither XRP nor any other crypto-currency has been given sufficient time and opportunity to become money.
For an asset that intends to serve as a payment medium in place of the shit-tier coinage and money issued by Congress, a lot of time, infrastructure, and social development must occur for people to truly understand and begin using it as money. XRP is the never-born. We can’t truly say what it is because it has not had time to truly become what it is. How can the Supreme Court rule that it is a security when its goal was to be a payment medium? Is money a security? “Am I not a man?”
How will we and the world resolve this question? A court can’t answer this question sufficiently. It’s not capable of doing so. Our legislature is blind to the bare facts of the world around it. The US legislature is a shit custodian of money. Yet the written law allows for none to attempt to replace them.
How will this current failure of legislation be overturned? Will it be achieved through cultural force and popular desire, or is it a question that will inevitably be answered through force of arms?
We still have a significant amount of time to pass before this could even get to that point, but it is something to consider. If we do begin to use crypto-currency as money, whether that’s bitcoin, Ethereum, XRP, dogecoin, or your favorite shitcoin of the day, this presents a significant threat to Congress. Not simply because they would be losing value for their own currency, but because they would be losing their ability to fund any spending beyond the taxes they collect.
If a significant portion of the population begins willfully using this alternative currency for every facet of their financial lives this would present a threat that could only be resolved through conflict or enough cultural impetus for the legislature to enshrine this basic fact into law.
Right now, very few people are using crypto to buy things. Even I can only count on two hands the number of times I have transmitted crypto to pay for an item or service. We’re just not there yet, at all. This entire sector of the economy has not had enough time to establish itself as money, and there exists no legislative backing for it to do so when that time arises.
Even at the institutional level, there are still only a few institutions engaging in DeFi to serve their clients, while the majority of financial actors are still engaging in TradFi. Culturally, we are quite a ways out still despite how much adoption we’ve gained over the past few years.
From the standpoint of whether it’s a security or not… XRP should lose.
From the standpoint of money, who can say what XRP might become? After the vultures have finished enriching themselves and the entire supply of XRP is in circulation and out of the hands of Ripple Labs it might actually become money. Until then it serves as little more than a get-rich-quick scheme for its creators.
But we’re all forced to watch the current case against XRP by the SEC. And to an extent, we’re forced to cheer for them despite XRP being spiritually alienated from what we are trying to achieve. The last things I want to see are executives and founders selling their bags to retail buyers who aren’t aware that they are being dumped on. But since we’re currently cheering for them to win so that no precedent is set that can be expanded upon and used against us, here’s something to cheer for.
Recent rulings in the SEC’s case against XRP have been in our favor. Two of the SEC’s expert witness testimonies have been thrown out, while none of the expert witness testimony on behalf of XRP was thrown out. This potentially increases the chance of a settlement with no ruling made and no precedent set.
A recent ruling has unsealed a speech by the former head of the SEC (William Hinman) and documents associated with that speech from 2018 where he said the following:
putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions. And, as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value.
The speech, of course, is already public, but I and the rest of the investing public are very curious to see how the associated documents may impact this case and the sector moving forward. These documents are scheduled to be unsealed on June 13th.
I personally think the argument against Ripple being a security is fairly easy, it’s not decentralized at all and the team and foundation have been using it to take advantage of retail buyers for their own personal benefit. But the SEC’s case against Ripple was so haphazard and ill-formed that the odds seem to be shifting out of their favor.
Meaning that we might see Ripple and its executives paying a fine and going about their business. Considering that the worst case of this would be the SEC being given a broad license to regulate crypto, a fine would be a very good outcome, even if it totally misses the broader discussion.
The broader discussion is still probably a decade out. As I’ve said before, we’re building a cathedral. 10 years is nothing in these terms. The Cologne Cathedral took 600 years to complete.
Building a new form of money will similarly be an endeavor that might stretch longer into the future than our own lives might stretch. Dred Scott never saw slaves gain citizenship in his lifetime, but it did happen nonetheless. We’re still a far way off from seeing a world in which a decent portion of the population buys, sells, invests, saves, works for, and accounts in crypto. Many crypto advocates have already died without seeing this dream come to fruition just yet. Many more will die before that occurs as well.
But this is the curse of many dreamers. It can’t be about just feeding your own family today, it has to be about something bigger. Dred Scott did not simply wish to not be a slave, he wished to be a man. Similarly, we do not wish to simply not be securities.
We wish to be money.
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