Ripple vs The SEC

Posted | 17/08/2021 / Views | 1455
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XRP is on a roll, reaching new highs in light of the bullish crypto market recently. However, this begs the question, is the SEC done with Ripple? First, let's recap what the SEC-Ripple situation is…

XRP's parent company, Ripple was in lawsuit troubles ever since the SEC opened up a case against the global payments company. It accused Ripple of offering unregistered securities up to the amount of $1.3 billion, starting in 2013. The dispute, which began in December last year, has ended up nowhere but has done much to damage XRP's reputation.

The resolution of the case will likely occur in early 2022 unless further delays push the timeline even more. Given that 96% of all SEC cases agree on a settlement before a trial, this seems to be a likely outcome, especially due to the negative effects on Ripple and XRP.  Until then, it cannot move forward with its initial public offering.

The SEC, however, has been stalling on multiple fronts to weaken Ripple’s position, but it is also highly concerned that any judgement for Ripple could create serious problems for the Howie Test, which helps to determine what can be considered a security.

Others feel that this is a natural step in the right direction for cryptocurrencies, and suggest that a new “Ripple Test” should be adopted that could help test for securities vs. currencies using guidelines that make more sense for crypto projects.

The demand for a Ripple Test is evolving whether the SEC wins its case or not. The conversation has moved beyond the SEC, not only because its credibility has been shaken by its startlingly bad arguments in the pre-trial phase. There is a growing recognition that the treatment of XRP by the SEC has come to symbolize the U.S. government’s fundamental misunderstanding of cryptocurrencies, decentralised ledgers and blockchain technology, and what they mean to the global economy. It looks like XRP will play a role in defining the future of the global economy and

This case is important for the crypto community as a whole and may determine whether the US plays a prominent role in crypto's future or is left behind. If Ripple loses, it would suggest several key possibilities.

First, that if XRP is a security, then Ethereum may fall under scrutiny next, and in fact any token may incur the judgement of the SEC, even after 5, 10, or more years. This type of uncertainty is bad for markets, and the effect would be felt throughout the crypto market.

Second, that the US as a nation will live with the result of this decision, and if Ripple is ruled against, the US will not be seen as a leader in the crypto industry. Instead, investments will find homes in more stable markets, leaving the US and its residents out of key growth.

One reason why Ripple needs to follow through with the lawsuit has been because of its biggest competitor, SWIFT. The Society for Worldwide Interbank Financial Telecommunication does large-scale transactions across 11,000 financial institutions in more than 200 countries. Ripple needs to make sure global banks, treasuries, etc., want to work with them. Resolving the case and gaining a compliant status with regulators is the only way.

The controversy led to a big dip in the token’s price. But now, the token is going up at a fast pace. This week alone, the token has risen by 60%+. Spurred by the market uptrend recently, XRP’s unique features as a token are contributing a lot to its growth. Ripple is also benefitting from new development in the lawsuit from the SEC.

Over the weekend, the SEC refused to hand over evidence discovery documents to Ripple's defence team. To add to this, it seems that the lawsuit has gotten Ripple more media attention. As such, the company successfully converted a PR into a marketing success. It got the support of many important firms recently. This includes GME Remittance, one of the largest non-bank remittance service providers in South Korea, which joined Ripple’s RippleNet. Before this, Japan’s money-transfer provider SBI Remit also teamed up with mobile payment service Coins.ph and SBI VC Trade exchange to carry payments from Japan to the Philippines through Ripple.

This landmark case has a lot riding on it, many twists and turns ahead, and is a drama worth watching closely… If Ripple are successful in their defence, the results will flow into XRP and the greater crypto market with great effect.