Luxembourg’s LPEA Association Says XRP Is A Payment Token Like Bitcoin

Luxembourg’s LPEA Association Says XRP Is A Payment Token Like Bitcoin

According to a recent report released by XRP Arcade, the Luxembourg Private Equity and Venture Capital Association (LPEA), informed that XRP is a payment toke like Bitcoin (BTC). XRP is the digital asset used by Ripple in order to perform cross-border transactions and to improve liquidity in specific financial corridors.

LPEA Association Considers XRP A Payment Token

LPEA is a representative body of private equity and venture capital professionals that play a very important role in the development of the investment framework in the country. At the moment, Luxembourg has a tax regime that provides a flexible and secure jurisdiction to operate in.

A few days ago, the LPEA Young PE Leaders Legal working group released a paper discussing security tokens and their legal aspects. There are different jurisdictions around the world that are trying to understand how to better regulate these digital assets and their influence in the market. The main intention of this paper is to propose a possible classification of tokens and the legal issues related to Initial Coin Offerings (ICOs).

As per the paper, there are three different kinds of tokens: Payment tokens, Asset tokens, and Utility tokens.

Payment tokens are virtual currencies that have been created to perform payments for acquiring goods and services. At the same time, payment tokens can be used to transfer value or money and are not related to a particular asset or service. The examples that the paper gives are XRP and Bitcoin.

About payment tokens, they wrote:

“Token holders have no right to claim against the issuer of the token. In fact, there is no issuer of the token in common sense because cryptocurrencies are based on decentralized control as opposed to centralized electronic money and central banking systems.”

Asset tokens represent assets such as debt or equities. They also promise a share of future earnings of a company or capital flows. Moreover, they can be compared with equities, bonds or derivatives as well.

The report informs that tokens that enable trading of physical assets on the blockchain fall in this category. According to the FINMA, if a token has common features that were found in securities, including dividend rights or future profits, then it can be deemed as a security.

Meanwhile, utility tokens are not considered securities. They are created in order to confer digital asset rights to applications or services. There are some virtual currencies in the market that can be considered utility tokens. There are several regulators that have already reclassified a large number of utility tokens as securities.

“If the only purpose of a token is to provide digital access to an application or service by means of a blockchain-based infrastructure, they can be considered as falling outside securities law.”

It is worth mentioning that although this is a typology for digital assets, there will be virtual currencies that operate in grey areas and that do not fall under just a single category.

Although this report does not have any influence on the decisions that the U.S. Securities and Exchange Commission (SEC) takes, it can show that XRP shouldn’t be considered a security. This is a debate that has been in the market for a long period of time. XRP supporters explain that XRP is not a security but the SEC did not provide any information about it yet.

This is very positive for XRP because if there are other countries and institutions considering XRP a payment token or any other kind of asset rather than a security, the SEC could finally label XRP, not as a security.

At the time of writing this article, XRP is the third largest virtual currency in the market. It has a market cap of $15.02 billion and each XRP can be purchased for almost $0.36 according to CoinMarketCap.