A US judge said on Thursday that Ripple Labs did not violate securities law by selling its XRP token on public exchanges.
The case marks the first win for a cryptocurrency company in a lawsuit brought by the US Securities and Exchange Commission.
Although the decision was specific to the individual case, it unleashed a wave of optimism among crypto investors that more cryptocurrencies may also not be deemed securities.
Still, the enthusiasm for some was tempered by a report from the Wall Street Journal that Binance, the world's largest cryptocurrency exchange, has laid off more than 1,000 people in recent weeks.
The lay-offs are continuing and could result in the exchange losing more than a third of its staff, the report said, citing a person familiar with the matter.
Coinbase also announced on Friday that it would limit its crypto staking services for retail customers in California, New Jersey, South Carolina and Wisconsin, pending proceedings several states initiated against the exchange last month, claiming that the programme violated securities laws.
Bitcoin hit its highest price since June 2022 earlier, touching $31,818, before edging down to trade around $30,091 on Friday.
The second-biggest token Ether had its best session since March on Thursday and XRP, which the US judge ruled could be legally sold on public crypto exchanges, soared 73 per cent and held most of these gains on Friday.
“The regulatory environment is changing,” said Matthew Dibb, chief investment officer at crypto asset manager Astronaut Capital. “And by what we have seen in the last 24 hours, it could be for the better.”
Justin d'Anethan, head of business development in Asia at Keyrock, a digital assets market maker in Hong Kong, said finding that XRP tokens sold on public crypto exchanges were not securities under law “probably serves as a precedent”.
“Ripple stakeholders were waiting for some regulatory clarity. Yesterday the court seems to have provided just that,” he said.
Following the decision, several major cryptocurrency exchanges, including Coinbase and Bitstamp, resumed trading of XRP on their platforms, after having suspended trading of the token in 2021 due to the SEC's lawsuit. Binance.US said on Friday it had also enabled XRP trading on its exchange.
Coinbase, which was sued by the SEC last month for alleged securities laws violations, saw its shares surge nearly 25 per cent on Thursday.
Cryptocurrencies have staged a gradual recovery so far this year, after prices fell sharply last year and a series of bankruptcies at major crypto companies, including crypto exchange FTX, left investors with heavy losses.
The collapse of FTX added momentum to global regulatory efforts at reining in the sector, especially to protect small investors lured by fast returns.
China has all but banned crypto. US investigators raking over FTX have accused founder Sam Bankman-Fried of multibillion-dollar fraud, to which he has pleaded not guilty.
Alex Mashinsky, the founder of bankrupt crypto lender Celsius, was charged with fraud for misleading customers and artificially inflating the value of the company's token, according to a US indictment unsealed on Thursday. He pleaded not guilty.
Meanwhile, Coinbase and bigger rival Binance face lawsuits, which they are contesting, from the SEC and in Binance's case from other regulators as well.
A top SEC official said last month the industry has “an ethos built around non-compliance”.
At Binance, the lay-offs as reported by the Wall Street Journal are occurring after a string of executives recently departed the company, including chief strategy officer Patrick Hillmann. Mr Hillmann confirmed on Twitter that he was leaving the exchange, citing personal reasons.
Still, crypto investors have taken encouragement from the world's biggest asset manager, BlackRock, filing to launch a Bitcoin exchange-traded fund last month. Earlier in July, exchange operator Cboe refreshed its filing for a similar fund to be run by asset manager Fidelity.
As a risk asset, cryptocurrencies could also stand to gain from a weaker dollar.
“We'd gone through this long period of just consistently negative news to make the space look pretty grimy,” said Chris Weston, head of research at brokerage Pepperstone in Melbourne.
“For the first time in a while, it's been consistently positive news coming though and that means you've got momentum.”