The SEC is no longer interested in suing crypto businesses, as happened to Ripple: it would end up harming the very investors it is supposed to protect.
This is the thesis of Forbes, which is also embraced by Coinbase CEO Brian Armstrong.
Why the Ripple-SEC lawsuit is bad for investors
While we wait for the legal case between the SEC and Ripple to come to a conclusion, Forbes points out that Ripple’s own investors have been harmed and have taken action against the SEC.
It was a Rhode Island lawyer, John Deaton, who first sued the SEC, representing a group of small investors. Subsequently, 19,000 other people joined in.
Because when the SEC declared war on Ripple, the price of XRP collapsed. If in November 2020 the cryptocurrency had started to grow again, returning to 70 cents, it lost significantly in value in December. XRP started 2021 at around 20 cents. Today, riding the bullish market, XRP is back to worth $1.13, but it remains far from the glories of 2017 when it came close to $4.
In addition, many exchanges, afraid of the legal consequences, have preferred to delist XRP.
XRP: token or security
The point is that if XRP were really declared a security, exchanges would also be in a tricky position. Selling securities requires proper licensing. But XRP did not consider itself a security and therefore had never produced the licenses that the SEC now demands.
The so-called XRP Army now accuses the SEC of double standards. For instance, Ethereum, which used an ICO to launch itself, was not pursued by the SEC. Instead, one of the SEC’s most prominent figures, William Hinman, went so far as to argue in 2018 that Ethereum and Bitcoin should not be considered securities. In the case against Ripple, the SEC branded those words as a personal position.
For XRP fans, it is proof that the SEC was not clear enough either.
In any case, according to those on Ripple’s side, it makes no sense to persecute the XRP company that didn’t launch through an ICO and leave Ethereum alone.
ICOs were indeed investment products. The same cannot be said for XRP tokens which give no right of profit to the holders but are prey to the laws of the market.
The SEC takes note of the growth of the crypto market
But does the SEC really want to go after the crypto sector, which is currently worth $2 trillion?
The cryptocurrency businesses have grown so much that to sue one of them is to harm the investors the SEC is supposed to protect.
This is what Brian Armstrong points out:
The Ripple case seems to be going better than expected. Meanwhile the SEC is realizing that attacking crypto is politically unpopular (because it harms consumers). https://t.co/ePLnbqNLwU
— Brian Armstrong (@brian_armstrong) October 26, 2021
“The Ripple case seems to be going better than expected. Meanwhile the SEC is realizing that attacking crypto is politically unpopular (because it harms consumers). The irony is that the people they are supposedly protecting are the ones attacking them”.
As part of the effort to avoid such short-circuits, Coinbase is working on a draft regulation of the cryptocurrency industry to share with authorities and institutions.
The lawsuit between Ripple and the SEC is the result of an unregulated landscape that leaves room for interpretation. With clear laws, this should no longer happen: crypto assets will benefit, the industry will benefit, but most importantly, investors, whether retail or institutional, will gain.