Amid a severe credibility crisis in the cryptocurrency space, bankrupt digital asset lender Voyager Digital (OTCMKTS:VYGVQ) received a critical lifeline. Binance.US cleared a legal hurdle in its bid to acquire Voyager’s assets. In turn, this led to a dramatic spike in the price of the VGX (VGX-USD) crypto. However, many challenges remain for both Voyager and the broader blockchain industry.
For context, Reuters reported in July 2022 that Voyager filed for bankruptcy. At the time, the news agency noted that “[c]rypto lenders such as Voyager boomed in the COVID-19 pandemic, drawing depositors with high interest rates and easy access to loans rarely offered by traditional banks.” Unfortunately, the combination of a sector slump and the implosion of two major tokens hurt the digital asset space.
Fast forward to March 7, CoinDesk reported that Michael Wiles, a bankruptcy judge in the Southern District of New York, overruled various objections directed against Binance.US’ bid to acquire the bankrupt lender’s assets. Overall, the deal features a value of over $1 billion.
To be sure, the judge noted that he must work through the confirmation order. Still, he indicated that he was in favor of approving the deal. Inherently, this development represents a blow to the U.S. Securities and Exchange Commission (SEC). Per Reuters, “SEC attorney William Uptegrove told Wiles at a hearing last week that SEC investigators believe Binance.US is operating an unregistered securities exchange.”
However, Wiles did not find the argument persuasive, stating that the regulatory agency failed to present any concrete evidence. In addition, he said the SEC should not have waited until the last minute to raise a concrete concern.
VGX Crypto Still Has a Challenging Road Ahead
On paper, the favoring of a proposed deal bodes exceptionally well for the VGX crypto and the broader blockchain ecosystem. This narrative confirms that the SEC can’t without pushback arbitrarily declare virtual currencies to be securities, thus forcing digital assets under its purview. It also demonstrates that legal authorities may be openminded about the shifting tides of the paradigm of money.
As well, the lifeline extended to the VGX crypto restores a modicum of trust and credibility to the beleaguered blockchain. In a comedy of errors, FTX previously proposed a bid to secure Voyager’s assets before it too declared bankruptcy. Under the proposed deal, Voyager estimates that the sale will allow customers to recover 73% of the value of their deposits at the time of its bankruptcy, per Reuters.
For the VGX crypto specifically, it provides some hope that it can provide capital returns for speculators. Still, massive hurdles remain ahead for VGX. In the trailing year, the crypto lost roughly 62% of market value. As for VYGVQ stock, it dropped over 99% during the same period.
Further, Voyager’s financial advisors stated that it needs up to four weeks to review new questions about Binance.US’s commitment to the acquisition, Binance.US’s regulatory compliance, and the security of Binance.US customer deposits, according to Reuters.
In addition, the deal faces scrutiny from the Committee on Foreign Investment in the United States (CFIUS). The agency is investigating national security risks associated with foreign investment in Voyager. For its part, Binance.US insists that it operates fully independently of international parent company Binance.
Why It Matters
Although the VGX crypto enjoyed a strong day during the midweek session, the broader blockchain market remains lackluster. At the moment, the total market capitalization of all cryptos barely hangs onto the $1 trillion mark. Risk-on assets have struggled since Federal Reserve Chair Jerome Powell opened the door for additional interest rate hikes.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.