Ripple’s problems with the SEC
Ripple’s problems with the SEC
Regulation

Ripple’s problems with the SEC

By Marco Cavicchioli - 22 Mar 2020

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Over the years, Ripple has had a number of problems with the SEC, the US Securities and Exchange Commission, the body responsible for supervising stock exchanges in the USA. 

The most long-standing problem is the matter concerning the nature of XRP. In fact, Ripple is actually the company, Ripple Labs Inc., which created the XRP token and the XRP Ledger blockchain. 

This blockchain is advertised as a decentralized blockchain, and Ripple denies having control over XRP. But not everyone agrees with this statement, partly due to the fact that most of the XRP tokens created are still in fact under Ripple’s control, although they are entrusted to a trust that manages their release. 

The point is that many argue that XRP is, in fact, a security and not a simple decentralized payment token, or utility token. 

Until today there has not yet been a definitive verdict on the subject, not least because there is an ongoing lawsuit filed by some applicants against Ripple, so the case is still open. 

If XRP were to be equated to a security, Ripple’s responsibilities towards the owners of XRP tokens would become much more stringent than they are now, and the company would probably have much less room for manoeuvre in the markets. 

Another problem, which is not of direct concern to the SEC, is the fact that Ripple would not be profitable without the continued sale of XRP on the market, so if the company were to be restricted in this respect, it could suffer serious damage

Another issue concerns Ripple’s continued selling of XRP tokens on the market, which seems to have a clear impact on the value of the token over time. 

To tell the truth, this lawsuit is closely related to the problem of the nature of the XRP token, because if this were considered as security, its sale on the market by the company would be regulated, and not free as it is now. 

To cut the bull’s head off, it has even been hypothesized that Ripple could be listed on the stock exchange with a normal IPO, fully regulated by the SEC, so that it could use this other system to finance itself on the market, thus perhaps ceasing to do so with the sale of XRP. 

The hypothesis makes sense, especially since it was, in fact, suggested vehemently by the CEO of Ripple himself. 

However, the curious thing is that the SEC has never yet publicly expressed itself on this subject, despite the fact that last year it published a guide for recognizing the so-called STOs, i.e. security token offerings. 

Sure, Ripple is no longer a token offering, as XRP has been in circulation on the markets since 2013, but it means that the SEC should probably have a pretty good idea what a security token is. 

Despite this, it seems that it has decided not to comment on it, for reasons unknown to date. Meanwhile, XRP and Ripple continue to function and operate as they always have, so much so that the SEC’s laissez-faire appears to be a factual, albeit non-formal, authorization to carry on as they have. 

 

Marco Cavicchioli
Marco Cavicchioli

Class 1975, Marco teaches web-technologies and is an online writer specializing in cryptocurrencies. He founded ilBitcoin.news, and his YouTube channel has more than 11 thousand subscribers.

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