XRP might not be classified as a security. This is a discussion that the cryptocurrency community held during the last months and that resulted in many different points of view. However, there are some experts that believe that the regulatory clarity that could be gained with XRP being labelled as a security would be outweighed by costs.
According to Max Rich, deputy counsel at the Republic platform, it is highly unlikely for the U.S. Securities Exchange Commission (SEC) to consider XRP as a security. Although XRP has been issued and released to the market in a similar way as a security, it would not have to be compliant with the current regulations because it happened a long time ago. However, Initial Coin Offerings (ICOs) that released their projects during the last few months and years would have to be compliant with the regulations imposed by the SEC.
Rich explains that the SEC could use the DAO situation in 2016 as the starting point for projects that released tokens to the market. For the deputy counsel at Republic, the SEC is going behind new projects that would be able to be compliant with the regulations and requirements imposed by the regulatory agency. And Ripple might not be in the top list.
Additionally, Michael Minihan, tax attorney and partner at BX3 Capital, explains that, in a similar way as Ether (ETH), XRP is very integrated with the cryptocurrency market and industry. Additionally, the token has been around for a very long time and it has a very important role in the crypto world. This is why a very hard regulation would have devastating effects on the crypto world.
Minihan Commented On This Issue:
“Basically, if you torpedo Ether, you’re going to tank the whole thing. You have the ability to tank most of the market by doing that. I think that’s not what they want to do. I think all they’re trying to do is protect investors, and by calling Ether a security, doesn’t protect investors.”
Initial Coin Offerings that said that the tokens sold were unregistered securities would have to reimburse investors and pay a fine. Although this does not apply to all ICOs, there have been already two that received an enforcement action issued by the SEC.
Ripple explains that it has created XRP as a virtual currency to use by the xCurrent and xRapid services. The main intention is to enhance cross-border payments and provide better solutions for banks and financial institutions all over the world.
Although there is no specific information about the number of banks that are using XRP, Ripple has partnered with more than 150 different financial institutions from all over the world. Some of the companies that are currently using xCurrent are American Express, Credit Suisse, Barclays and UBS.
The SEC did not talk about XRP and how to consider it. Nonetheless, the regulatory silence around XRP could not necessarily mean that it can be considered a security. During the last month, XRP was able to acquire the second position in the market after Bitcoin (BTC). In this case, XRP attracted more investors than Ether, which was in the second position in the market.
At the same time, Ripple tried to differentiate the company from the virtual currency in a campaign that started earlier this year.
The SEC seems to be worried about recent violations to the securities laws that have effect in the United States. Now XRP and Ripple should be focused on providing good services to banks and financial institutions all over the world in order to avoid XRP being considered a security.