“XRP should not be regulated as a security,” says former CFTC Chairman Christopher Giancarlo. According to him, it should be considered a currency or medium of exchange.
Though exciting for XRP enthusiasts, sad for Ripple, because Giancarlo is no longer a regulator.
He is actually on payroll of Ripple as on the footnote of the paper titled “Cryptocurrencies and US securities laws: beyond bitcoin and ether,” it has been mentioned that the authors of the paper Giancarlo and Conrad Bahlke are counsel at Willkie Farr & Gallagher, which “counsel to Ripple on certain matters.”
And as Jake Chervinsky, general counsel at Compound Finance pointed out, only courts’ and SEC’s opinion matters.
There are only two opinions about XRP's security status that matter: those of the courts & the SEC. Everything else at this point is noise.
— Jake Chervinsky (@jchervinsky) June 17, 2020
Moreover, they relied on certain factual information provided by Ripple only, the company that created XRP and owns the majority of it.
In December 2019, Giancarlo was deemed “Crypto Dad” after his impassioned speech in front of the Senate where he warned them that ignoring the cryptocurrencies would be a mistake and that they need to embrace it because its adoption might be inevitable.
“XRP does not meet each of the prongs of the Howey test”
In the paper, Giancarlo and Bahlke argued that XRP’s increased adoption as a medium of exchange and a form of payment in the recent year “underscores” its utility as a “bona fide fiat substitute.” Published on International Financial Law Review, the paper echoes all that Ripple executives have been saying. The paper reads,
“The mere fact that an individual holds XRP does not create any relationship, rights or privileges with respect to Ripple.”
They further point out that the ownership of XRP does not give its bagholders any rights to Ripple or any share in its profits and losses. The authors didn’t miss that XRP Ledger was designed first and Ripple Labs only came later.
“Ripple has not marketed XRP as an investment product, nor has it promised XRP holders any sort of profit or return on investment,” it said. The paper further goes on to say that the XRP architecture is not only autonomous but “exists entirely independently of Ripple,” and it would continue to function even without the company.
As for all the XRP that Ripple has, Giancarlo says it’s all in escrow and no different than bitcoin miners selling mined tokens.
Overall, “XRP does not meet each of the prongs of the Howey test” as such not security, the paper states.