Ripple and the SEC lawsuit

On 22nd of December 2020, the U.S. Securities and Exchange Commission (SEC) filed an action against Ripple and two executives due to raising $1.3 billion in 2013 in which they allegedly failed to register their offers and sales, violating registration provisions of the federal securities laws. With the SEC viewing XRP as a security rather than a currency, the complaint states that ripple has violated laws and deprived retail investors of important (and entitled) information. Unlike Bitcoin (BTC) and Ethereum (ETH), which are not deemed security because the networks are decentralised. The way XRP was set up and distributed differs XRP from BTC and ETH, potentially labelling it as a security. 

The result of this news saw the cryptocurrency giant’s worth, drop from $22 billion to $3 billion with an approximate 63% dump according to trading view (XRP/USDT pair). 

Coinbase, the second top cryptocurrency spot exchange (according to CoinGecko),  has notified users of plans to suspend trading XRP as of 10 am 19th of January 2021. 

Source: Ripple SEC Lawsuit Coinbase Help Page [https://help.coinbase.com/en/coinbase/trading-and-funding/cryptocurrency-trading-pairs/ripple-sec]

One of ripples investors (Tetragon Financial Group Ltd.) has also filed a lawsuit against ripple following the SEC complaint; however, according to a statement given by ripple themselves, the case has ‘no merit’ as XRP has not been determined to be a security. 

So why did ripple all of a sudden pump 50% on 8th of Jan? Considering it was ‘dumped’ and the ripple CEO tweeted (@bgarlinghouse) a somewhat motivational strong message to XRP supporters, this may have contributed to the spike in XRP’s price. 

 Source: @bgarlinghouse

There are also talks of non-U.S. retail investors (specifically Asia), pumping the price of XRP to follow the current bull run market.  According to Ripple’s CEO, Ripple has tried to settle the action with the SEC, although if the SEC rejects, this bad news may also cause another heartache for XRP holders as the court case continues. 

Concluding thoughts:
Until we have answers as to whether XRP is a security or a currency, there could be ongoing uncertainty and volatility with this token. However, considering the ever-evolving changes to regulating digital currencies, this type of news may not actually be that worrying. With innovation such as blockchain technology, establishing standards and regulations without limiting innovation can sometimes be a challenging balance. Perhaps the news with SEC and XRP is just one of these challenges we must go through to make history.

Let us know your thoughts in the comments below on ripples current news.

For a quick wrap up of the week ending 10th January 2020, check out our video below: