The Ripple Effect Debate Around XRP Being Considered a Security or Not Continues with the SEC
Ripple is a very popular and recognized company in the cryptocurrency industry. It has been in the market for several years and it has expanded all over the world. The XRP virtual currency has also reached the second position in the market surpassing Ethereum (ETH) and showed to be very resilient compared to others.
However, there is still uncertainty around this cryptocurrency. The U.S. Securities and Exchange Commission (SEC) did not provide information on whether XRP is a security or not. However, the SEC has been going behind other ICOs that were accused of selling unregistered securities.
One of the things that are taken into account is the possibility to decentralize Ripple and the XRP network in order for it not to be considered a security. This is something that was proposed by the SEC’s William Hinman during the Yahoo! Finance summit some time ago.
He said that there might be other decentralized networks and systems in which it might not be necessary to regulate the tokens or coins. Although he was sharing his personal opinion, this is one of the closest things that the market has related to how decentralization plays an important role a the time of evaluating whether a token is a security or not.
If XRP is able to become decentralized enough, it might be possible for it to avoid being considered a security.
James Park, in a report for the Lowell Milken Insitute, explained:
“For a utility token to be distributed freely without regulation by the securities laws, it must be functional. But many utility tokens are only functional if they are distributed widely enough so that a de-centralized system arises.”
Furthermore, there have been many Initial Coin Offerings (ICOs) that have described the tokens issued as utility tokens. However, this is something that has been misused by ICOs in order to receive a larger amount of funds.
Most of these ICOs did not have any real platform functioning. Which utility these tokens can have if there is no platform? XRP, instead, has been created to work on top of a platform that is already running and that continues to expand all over the world. It can be used to make purchases, payments and also by companies to obtain liquidity when they make cross-border transactions.
Bitcoin (BTC) and Ethereum (ETH) have been described as cryptocurrencies with large communities and many companies working together. Hinman showed that these two cryptos were decentralized. However, Ripple raises some concerns since XRP depends on what Ripple does to a very important extent. Nonetheless, things are changing. There are other companies such as Omni or Coil, and also some individual developers that are working in order to increase and facilitate XRP payments.
Ripple supporters also say that Bitcoin miners are completely centralized in China and that the network is not decentralized. Despite that, Bitcoin has been considered a commodity.
It is also important to mark that Coinsource’s Deputy General Counsel Max Rich said that they are putting their strength in tackling recent platforms rather than old ones. Although it does not mean that Ripple cannot be investigated, it allows the company to keep decentralizing its network.
However, it is necessary for a centralized entity to make a network decentralized. This is something that some people calls the Hinman Paradox. Ripple remains centralized in many ways because there is an incredible amount of XRP on Ripple’s hands, although held in escrow accounts. But the future could be bright for this network if the team behind it is able to push decentralization forward.
XRP remains as the second largest virtual currency with a market capitalization of $12.99 billion. Each XRP coin can be purchased for $0.31.