UK’s Financial Conduct Authority Declares Ripple’s XRP Coin To Be Not A Security
The Financial Conduct Authority (FCA) of the United Kingdom declared that XRP is not a security. Ripple head Brad Garlinghouse took to Twitter to applaud the UK regulators for providing clarity on that matter.
Applauding UK regulator, @TheFCA, for providing clarity & leadership on the classifications of digital assets. They recognize ETH has the features of a hybrid exchange/ utility token (not a security token) and call out the similarities between ETH and XRP. https://t.co/14b1lxNopO
— Brad Garlinghouse (@bgarlinghouse) July 11, 2019
Back in the summer of 2018, the United States Securities and Exchange Commission (SEC) stated, in separate statements within 2 days of each other, that it doesn’t consider Bitcoin or Ethereum as securities.
As the third most valuable cryptocurrency in the world today, the XRP doesn’t behave in the same manner as Bitcoin or Ethereum. In fact, on the surface, XRP looks exactly like security. The press release notes:
“Tokens may have mixed features that may overlap with the above categories, or change over time. For example, Ether can be used as a means of ‘payment’ (exchange token) on the Ethereum platform, and can also be used to run applications (utility token). Ripple has similar features.”
Recently, charges have appeared, alleging that Ripple distributes XRP by selling the coins and the majority of buyers purchase them as investments. If this was the case, then XRP would be subject to the same regulations that govern the traditional securities: stocks, bonds or even the ICO tokens. However, the situation mentioned above is different from securitizing futures contracts and backing them with XRP.
The question of whether XRP is a security resurfaces every now and again. Just last year US FinCen had declared it not to be a security, but rather a currency. Ripple is facing two class action lawsuits that allege XRP is a security controlled by Ripple. The company is pushing back against the claims and has hired two former SEC officials to represent it in court.