Ripple’s XRP doesn’t have to be a security to get sued by the SEC

Rick Steves

“When we think about a cryptoasset as being a security what we’re doing is we’re saying it’s being sold as part of an investment contract.”

SEC Commissioner Hester Peirce, also known as “crypto mom”, has recently stated that the SEC should focus more on regulatory clarity and less on enforcement at the present time.

Ms. Peirce told Bloomberg TV what is the SEC’s intention when filing a complaint against a firm for an unregistered securities offering.

“When we think about a cryptoasset as being a security what we’re doing is we’re saying it’s being sold as part of an investment contract. It doesn’t mean that the asset itself necessarily has to be a security. It means that it was being sold as a security.”

This could relate to XRP as well, although she is not commenting on ongoing SEC litigation.

The SEC complaint, filed on 22 December 2020, doesn’t seem to mention that broader view. This is how the first paragraph goes:

“The Securities and Exchange Commission announced today that it has filed an action against Ripple Labs Inc. and two of its executives, who are also significant security holders, alleging that they raised over $1.3 billion through an unregistered, ongoing digital asset securities offering.”

Throughout the lawsuit, the regulator has claimed that Ripple’s XRP is a security due to its centralized nature and so, it falls under its regulatory scope.

Ripple says it never held an ICO nor its digital asset can be defined as a security since its utility is proven every day across the globe as it is used for cross-border payments.

In April, the U.S. House of Representatives passed a bill that is meant to set up a digital asset working group to provide regulatory clarity in the crypto industry.

The “Eliminate Barriers to Innovation Act” mandates the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to work together as the “SEC and CFTC Working Group on Digital Assets. A report would be submitted within a year. The bill was introduced in March by Rep. Patrick McHenry (R-North Carolina).

This past week, the House Committee on Financial Services has launched a Digital Assets Working Group of Democratic Members, said Congresswoman Maxine Waters (D-CA), the Chairwoman of the committee at the first hearing held by the Task Force on Financial Technology.

“As cryptocurrencies, central bank digital currencies and other digital assets enter the mainstream, the Committee will look at how digital assets have begun to enter many aspects of our lives – from payments to investments to remittances – and consider how to devise legislation to support responsible innovation that protects consumers and investors while promoting greater financial inclusion”, Ms. Waters stated.

Being composed only by Democrats, the working group might only be able to go so far in its assertions and proposals. Still, it seems that the United States Congress is finally moving forward and taking initiative.

The anxiety-ridden SEC v. Ripple has recently seen the fact discovery deadline being extended by 60 days. This alters the predictions regarding the end of the lawsuit (updated agenda).

Attorney Jeremy Hogan, a popular member of the XRP community, shared his thoughts on the timeline and a date for a summary judgment.

 

Read this next

Digital Assets

Binance US weighs plans to go public, CEO CZ says

Binance.US, the American outpost of the world’s biggest crypto exchange, has seemingly plans to follow Coinbase’s path and go public one day.

Retail FX

FX volumes, number of active clients boom at Exness in June 2021

The latest group of retail FX platforms to report their monthly volumes indicate that June was a busier month all round, with Exness setting its second-highest monthly volumes on record.

Industry News

Individuals impersonating CySEC representatives draw warning from Cyprus watchdog

The Cyprus financial watchdog said on Friday there was evidence of fraudulent impersonation of its officials who are engaged with firms under CySEC’s supervision.

Digital Assets, Inside View

SEC v. Ripple angers XRP holders as rival Stellar (XLM) mixed in “love triangle” over MoneyGram

“Although the SEC claims that all XRP are unregistered securities and Brad Garlinghouse and Chris Larsen unjustly enriched themselves, it allows Ripple Co-founder JedMcCaleb to sell his XRP for hundreds of millions of dollars to possibly buy MoneyGram. Makes perfect sense”, said XRP Holders’ attorney John Denton ironically.

Industry News

Monex loses second appeal in CFTC anti-fraud enforcement action

Since Dodd-Frank that such trading must be conducted on a regulated exchange, and that the offeror must be registered with the CFTC.

Technology

Profile Software announces automated custody platform and mobile tech

The upgraded version of Axia Custody offers advanced functionality for multi-custodian operations across borders for a competitive multi-channel international-level client experience.

Industry News, Institutional FX

IHS Markit to pay CME Group $113m amid EU approval of post-trade JV

IHS Markik, at the same time, is being acquired by S&P Global Inc for $44 billion in stock, subject to approval as well.

Digital Assets

India’s Central Bank working towards implemention of digital currency

The Deputy Governor of the Reserve Bank of India, T Rabi Sankar, has said that the central bank was working towards a phased implementation of a central bank digital currency and is in the process of introducing it for wholesale and retail segments shortly.

Industry News

Visa acquires Currencycloud to facilitate global funds movement

Visa has announced the acquisition of Currencycloud, which provides APIs which help institutions with remittance and currency exchange capabilities in a deal that is valued at $963 million.