The past few months have been challenging for Ripple’s XRP owners . The cryptocurrency plummeted in price while the other top cryptocurrencies by market capitalization saw price growth that has not been seen in years.
Ripple’s XRP’s drop in price is due to the charges brought against Ripple Labs and two of its executives in December. The SEC’s charges include the sale of over $ 1 billion in unlicensed securities based on the sale of Ripple’s XRP. The SEC claims that Ripple’s XRP is a security – a designation that has not been assigned to the two major cryptocurrencies, Bitcoin and Ether.
That announcement resulted in a price drop of over 50 percent as many platforms using RippleNet and Ripple’s XRP ceased operations over these allegations. These platforms are not regulated by the SEC and want to stay that way.
As such, these allegations could bring them under US jurisdiction if they are involved in the sale of securities to users. Even regulated firms like Grayscale, the largest digital asset manager in the cryptocurrency space, reduced the Crypto Revolt holdings after this announcement.
Ripple is fighting back
Many stakeholders in the XRP ecosystem were extremely upset by these claims. Some filed petitions.
Some have turned against the SEC for waiting seven years after Ripple’s XRP launched to take action. Others sued platforms like Coinbase for allowing the unregistered sale of securities.
Aside from all of the drama surrounding these allegations in late 2020, Ripple responded legally to the allegations. In the filing, they alleged that the charges are based on “an unprecedented and ill-conceived legal theory – with no legal mandate or authorization from Congress”.
Ripple says XRP is not a security
The Ripple Labs legal team states that Ripple’s XRP is not a security. They justify this with the fact that “XRP performs a number of functions that differ from the functions of“ securities ”, as the law has understood this term for decades. For example, the token functions as a medium of exchange […] It is not a security and the SEC has no authority to regulate it as such ”.
Ripple Labs, Brad Garlinghouse, and Christian Larsen claim that since the token acts as a “currency,” which is a means of storing and transferring value, the SEC has no jurisdiction over it as a security.
However, Ripple Labs and the other two defendants allegedly sold over $ 1 billion to Ripple’s XRP to fund their businesses – and for personal reasons. This has traditionally not been possible with a privately issued “currency”. For now, Ripple’s XRP will remain pending, but it should be very interesting to see how the SEC reacts.
However, the crypto community seems happy that Ripple is officially reacting – at least if the price can be an indication of it.