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The cryptocurrency XRP, produced by Ripple Labs, has been the subject of ongoing legal action by the Securities and Exchange Commission (SEC), which contends that the digital asset is a security and should be registered with the agency. However, a lawyer who supports Ripple has presented a compelling argument in favour of not classifying XRP and several other tokens as securities.
Since the SEC filed a lawsuit against Ripple Labs in December 2020, the debate regarding whether XRP is a security has been ongoing for several years. According to the case, the company and its executives allegedly offered investors $1.3 billion in unregistered XRP securities.
The central point of the SEC’s argument is that XRP satisfies the legal definition of a security, which is an investment contract in which an individual invests money in a joint enterprise in the hope of earning profits solely from the efforts of others.
However, pro-Ripple lawyer John Deaton believes that XRP and several other tokens do not meet this definition and should not be considered securities. Deaton thinks XRP is more like a commodity or currency than a security.
Deaton has cited several essential points to back up his argument. First, the Ripple network, primarily utilized by financial institutions to facilitate cross-border payments, accepts XRP as a medium of exchange and a means of payment. This suggests that XRP is sold as something other than speculation but as a utility token.
Second, unlike traditional securities like stocks and bonds, which are subject to price manipulation, XRP is not. Deaton argues that market forces, rather than a single promoter or issuer, are primarily responsible for XRP’s price.
Thirdly, the value of XRP is independent of Ripple Labs or its executives’ efforts. The value of XRP is independent of the success or failure of the company that issued it, in contrast to conventional securities. Instead, the open market’s supply and demand determine its value.
Deaton concludes by pointing out that in addition to investment, XRP can also be used as a payment method and a tool to speed up cross-border payment settlements. This suggests that XRP has a value that exceeds the potential for its price to rise.
Several other industry professionals, including former SEC Commissioner Joseph Grundfest, who believes that the SEC’s case against Ripple is “weak,” have backed Deaton’s arguments. Grundfest has argued that XRP is more like a currency than a security due to its utility as a payment method and decentralization.
However, these arguments have not swayed the SEC, which has maintained its legal action against Ripple Labs. The agency has argued that Ripple Labs and its executives made false and misleading statements to investors about XRP and that the sale of XRP was an unregistered securities offering.
The cryptocurrency industry as a whole may be significantly impacted by the outcome of the SEC’s case against Ripple Labs. If the SEC wins, it could set a precedent for other cryptocurrencies to be considered securities, putting them under additional regulatory scrutiny.
However, if Ripple Labs is successful in its defence, it could provide a path for other businesses to launch digital assets of a similar nature without worrying about being penalized by regulators.
In conclusion, there still needs to be a consensus regarding whether XRP is a currency or a security. Pro-Ripple lawyers like John Deaton have presented compelling reasons why XRP should not be classified as a security, despite the SEC’s assertion that XRP meets the legal definition of a security. The cryptocurrency industry will keep a close eye on the outcome of the SEC’s case against Ripple Labs because it could significantly impact how regulators treat them.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
