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Reversed crypto ruling in US pulls down prices of related stocks
By Lee Min-hyung
Crypto-linked stocks are displaying increased volatility after a U.S. court ruled that cryptocurrencies are securities, reversing a precedent on Ripple's token XRP a few weeks ago.
The ruling by a Manhattan federal judge came as a bane to overall crypto sentiment, with major cryptocurrencies ― such as Bitcoin and Ethereum ― displaying weak performances following the decision. Stocks of companies with stakes in major crypto exchanges here are also displaying instability, as the latest ruling heightens regulatory risks in the crypto industry.
Shares of Woori Technology Investment, which holds a stake in Korea's largest crypto exchange, Upbit, plunged by more than 3 percent on Thursday morning following the ruling. Other shares classified as crypto-themed issues also extended a losing streak. The stock price of Wizit also closed down 2.8 percent. Wizit's subsidiary invested in the nation's second-largest crypto exchange, Bithumb.
The two major crypto-linked stocks achieved a robust rally in mid-July after a U.S. judge ruled in favor of Ripple over the firm's lawsuit against the U.S. Securities and Exchange Commission.
The ruling brought a years-long crypto security debate back to square one. Financial authorities in Korea are also closely monitoring a series of rulings in the U.S. amid a lack of crypto-related legal guidelines here. If cryptocurrencies are legally classified as securities, crypto trading could be a violation of the local capital markets act.
In Korea, no meaningful ruling has been made by a local court over the same agenda, so any decision by their U.S. counterparts will be a guideline for Korean financial watchdogs and legal authorities.
The escalating legal risk on cryptocurrencies is expected to keep weighing on investor sentiment on large-cap cryptocurrencies as well. According to data from the crypto market tracker, CoinMarketCap, all of the top 10 cryptocurrencies in terms of market capitalization suffered a decline in their valuations as of 3:35 p.m. on Thursday from a day earlier.
"The lack of precedent will make it harder for authorities to introduce regulatory guidelines here in a timely manner despite escalating woes over crypto fraud here and abroad," an industry source said. "The contrasting ruling by the U.S. court will also keep having a negative impact on overall crypto investor sentiment."
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