Andrew Button is a freelance financial writer with extensive experience writing about stocks, real estate and managed products. His portfolio consists mainly of blue chip dividend paying stocks and index funds. He has completed the Canadian Securities Course and passed the CFA Level 1 exam.
If it is, then Ripple Labs will be held liable for selling securities without registration.
If it’s not, then the company will be able to go back to life as usual.
This has huge bearing on the entire cryptocurrency market. If XRP is a security, then other cryptocurrencies are as well. In common law countries, legal decisions set precedents. That means that the ruling applies in situations similar to the one the initial lawsuit was based on. Therefore, if the U.S. SEC was to get XRP regulated as a security, it would gain regulatory power over other cryptocurrencies too.
Fortunately, it doesn’t look like that will happen. Most coverage of the SEC v. Ripple lawsuit suggests that Ripple is winning. The SEC’s own officials are on record as saying that cryptos aren’t securities, and the SEC seems to be failing to get that testimony excluded from discovery. Given this fact, it looks like XRP won’t become a security. In this article, I will further bolster that claim by showing that XRP does not meet the definition of a security.
Characteristics of a security
The U.S. Securities Actdefines the term “security” by a list of examples. The definition does not have any qualitative criteria, but instead consists of the word “any” followed by terms like:
Stock
Bond
Option
Warrant
and dozens more
It looks like the lawmakers who drew up this definition intended for it to be as comprehensive as possible. It includes pretty much every common financial asset that existed before cryptocurrency was invented. What it doesn’t include is:
Real assets (e.g., houses, precious metals)
Currencies
Based on existing U.S. securities law, currencies (as in the money itself) are not securities. Some “cash equivalents” like Treasuries and GICs are. But the physical cash itself isn’t. Given that cryptocurrencies are primarily used to buy and sell things, they seem to fit the definition of cash better than that of securities. There is serious debate as to whether cryptocurrencies truly are money (their prices are too volatile to serve as useful units of account), but they are closer to money than they are to anything on the list of securities in the U.S. Securities Act. So, they basically are not securities.
Why XRP is not a security
XRP is not a security because, like most cryptocurrencies, it does not meet the definition of the term in question. First, on the most literal level, the category of asset it belongs to is not included in the definition. Second, there is one asset class that it may belong to (money), and that asset is not a security. Third, and finally, the SEC, who are suing to have XRP regulated as a security, have been caught behind closed doors saying that cryptocurrencies aren’t securities. Unless XRP is qualitatively different from other cryptocurrencies, it is not a security, based on the SEC’s past claims.
It seems like a pretty clear case: XRP isn’t a security. Whether it’s money is debatable. But a security it is not.
XRP, as a digital asset, is not in and of itself an investment contract. Selling any asset (including a digital asset) via an investment contract does not automatically make the subject asset a security.
XRP trading would be more complicated if the coins were found to be securities, Ripple's lawyers said — and sellers might even face individual liability for trading unregistered securities. It would also be harder, according to Ripple, for businesses to accept and make payments using XRP if the tokens are securities.
The SEC sued Ripple, its CEO Brad Garlinghouse and co-founder Chris Larsen in 2020, accusing them of illegally raising more than $1.3 billion in an unregistered securities offering by selling XRP.
Is XRP considered a good investment? Speaking to Forbes Advisor Australia, Grzegorz Drozdz, a market analyst at fintech firm Conotoxia said: “Investing in XRP is risky and may not be suitable for most investors due to the high price volatility and the difficulty in predicting future trends in the cryptocurrency market.
Ripple (XRP) is a popular choice among banks worldwide. The network's fast transaction speeds, low gas fees, and energy-efficient consensus make it an ideal cryptocurrency for traditional financial institutions.
In court, Ripple argued that XRP was not a security. The company scored a partial victory in the landmark case in July 2023. A Southern District of New York judge ruled that XRP is a security when offered for sale to institutional investors but not when sold on an exchange to retail investors.
Ripple recently scored an unequivocal victory from a dollars-and-cents standpoint in a class action securities lawsuit, with the judge tossing out most of the case.
At the current Ripple price, one XRP is worth $0.606474. Kraken makes it easy to sell Ripple for USD in minutes. How do I get my money after selling Ripple? After you sell your Ripple using Kraken, you can use our flexible funding options to withdraw your cash to your bank account in as little as 0-5 business days.
XRP as a project is far from dead – it continues to form partnerships with financial institutions. It also attracts significant trading volumes and a loyal community of holders.
Ripple pocketed a partial victory when Judge Analisa Torres ruled that XRP was not a security in July 2023. The judge is expected to rule on a fine to be imposed on Ripple for alleged violation of securities laws. It remains to be seen whether the regulator appeals Judge Analisa Torres' ruling.
If the crypto market cap hits $3 trillion and XRP retains its current 1.10% dominance, its price could ascend to $0.589 by 2025. In a more bullish scenario of the crypto market surging to $10 Trillion, the price of XRP could soar to a staggering $1.96, resulting in a potential 4x return for investors by 2030.
Ripple deserves credit for attempting to build a real-world use case for crypto and blockchain, which is a breath of fresh air compared to all of the useless speculative coins and tokens out there. However, based on the facts, I don't think XRP can be a millionaire-maker. There's simply too much uncertainty.
Whether to buy or sell XRP depends on your investment goals, risk tolerance and market outlook. While some small wins in the SEC case have led to positive sentiment, the final outcome's impact on the token's price remains uncertain.
In the daily chart, XRP is bullish. The 50-day moving average, currently below the price, is rising, which might support future price movements. The 200-day moving average has been falling since 03/07/2024, showing long-term weakness.
He has also attracted more than 50,000 followers on Twitter. The crypto industry celebrated Ripple's partial win in court on Thursday, as a judge has ruled XRP (XRPUSD) is not a security.
XRP remains one of the top cryptocurrencies in terms of market cap. It can be used just like any other digital currency for transactions or as an investment. If you choose to invest, however, be sure that you don't invest more than you can afford to lose.
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Introduction: My name is Roderick King, I am a cute, splendid, excited, perfect, gentle, funny, vivacious person who loves writing and wants to share my knowledge and understanding with you.
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