US Securities and Exchange Commission sued Ripple! The XRP course crashes
The exchange of blows between Ripple and the US stock exchange regulator goes into the next round. Much is at stake for Ripple when it comes to whether XRP is a currency or a security. The XRP course is showing itself to be battered by recent developments.
The question of whether XRP is a security, i.e. a security token, has been preoccupying the US Securities and Exchange Commission for years and hangs like the sword of Damocles over the Ripple project. Finally, classifying XRP as a security could end up costing the company dearly. If the SEC sticks to its reasoning, the fintech is not only threatened with fines. The decision could also trigger a wave of lawsuits from investors. The pressure on the company is growing.
As the online magazine Fortune first reported, the Ripple boardroom received mail from the SEC on Monday. The supervisory authority has apparently informed those responsible for Ripple about an impending proceeding. The allegations are by no means new and have been with the company since the first XRP issue. The casus crisp: is XRP a currency or a security?
In the case of a security, the company is guilty of issuing unregistered securities – no trivial offense. The US Securities Act only provides for exceptions for the issue of securities to accredited or qualified institutional investors.
XRP, a currency?
Ripple has always argued that XRP is a means of payment (utility token), i.e. a currency, with no company participation by the buyer. From the point of view of Ripple CEO Brad Garlinghouse, it suggests that XRP primarily functions as a bridge currency in the cross-border payment network RippleNet. In addition, the inflation rate is lower than with Bitcoin or Ethereum, both of which are clearly classified as crypto currencies.
The regulators do not seem to share this opinion. The inflation rate in particular could ultimately be the company’s undoing. Because the fintech holds back more than half of the around 100 billion XRP issued in trust accounts. In contrast to Bitcoin and Ethereum, token emission is highly centralized.
The fact that the company regularly unlocks XRP contingents from the in-house trust has also led Ripple to accuse it of price manipulation. Coupled with the fact that significant amounts of XRP are in the hands of Ripple founder Chris Larsen and CEO Brad Garlinghouse, it can be argued that XRP is more of a security than a currency. As a result, the way would also be free for further class actions. The company is repeatedly confronted with accusations of investor deception. The classification of XRP as a security would be grist to the mill of creditors.
However, Garlinghouse does not want to admit defeat without resistance. The CEO is combative on Twitter:
“The SEC – not in line with other G20s and the rest of the US government – shouldn’t be able to pick what innovation looks like (especially if its decision directly benefits China). Make no mistake, we are ready to fight and win – this battle is just beginning.
Garlinghouse even senses political calculation behind the SEC’s decision. In keeping with Trump’s anti-crypto doctrine, SEC chairman Jay Clayton is said to abuse the last moves of his term in office to torpedo the token economy with conditions. Either way: the fronts seem hardened, a tough legal process inevitable.
The dispute with the stock exchange regulator tore the XRP price down overnight. At press time, the third largest cryptocurrency is trading at $ 0.45, 16 percent lower than the day before. The first receipt from the investors.