It’s been a wild couple months for the crypto space! While Bitcoin contiunes to hit all time highs on a regular basis and Coinbase is filing for an IPO, Ripple crypto (XRP) has not been so fortunate of late. Despite setting new 3 year highs recently, Ripple has been getting hammered in the legal arena and on multiple exchanges. So what is the deal? Below we explain all the headwinds for why Ripple Crypto is getting annihilated today.
So what really started this downward slide into oblivion?
According to the SEC’s Press Release “SEC Charges Ripple and Two Executives with Conducting $1.3 Billion Unregistered Securities Offering”:
Washington D.C., Dec. 22, 2020 —The Securities and Exchange Commission announced today that it has filed an action against Ripple Labs Inc. and two of its executives, who are also significant security holders, alleging that they raised over $1.3 billion through an unregistered, ongoing digital asset securities offering.
According to the SEC’s complaint, Ripple; Christian Larsen, the company’s co-founder, executive chairman of its board, and former CEO; and Bradley Garlinghouse, the company’s current CEO, raised capital to finance the company’s business. The complaint alleges that Ripple raised funds, beginning in 2013, through the sale of digital assets known as XRP in an unregistered securities offering to investors in the U.S. and worldwide.
Ripple also allegedly distributed billions of XRP in exchange for non-cash consideration, such as labor and market-making services. According to the complaint, in addition to structuring and promoting the XRP sales used to finance the company’s business, Larsen and Garlinghouse also effected personal unregistered sales of XRP totaling approximately $600 million. The complaint alleges that the defendants failed to register their offers and sales of XRP or satisfy any exemption from registration, in violation of the registration provisions of the federal securities laws.
Well that sounds ominous.
I would not want to be on that Board.
SEC Has a Point…
Essentially, the SEC is charging Ripple and its executives with knowingly selling unregistered assets (XRP). The SEC considers these XRP tokens as securities under the Securities Act of 1933, which has a very different legal definition than a “cryptocurrency.”
Unlike other cryptocurrencies, Ripple is in no way decentralized and its coins are not “mined” like Bitcoin. Virtually all cryptocurrencies are mined and completely decentralized, which is their primary appeal to long term holders.
For this reason, we believe it is very likely the SEC has a strong argument and will win this case.
When the dust settles, there may be some very disturbing news for the crypto space.
Cryptocurrencies have been able to flourish and grow exponentially due to the lack of regulatory oversight and legal precedent.
A ruling in this case may unfortunately change all of that…
In response to this lawsuit, multiple platforms have delisted or halted trading of XRP.
According to Coindesk.com:
Coinbase first listed XRP on its retail-facing platforms in February 2019. Starting now, XRP trading “will move into limit only,” Coinbase wrote. It will be fully suspended on Tuesday, Jan. 19, 2021, at 1 p.m. ET.
“We will continue to monitor legal developments related to XRP and update our customers as more information becomes available,” Paul Grewal, Coinbase’s chief legal officer, wrote in a blog post shared in advance with CoinDesk.
Lots of bad news stacking up Ripple. But it’s not just Coinbase.
Crypto.com, a cryptocurrency exchange and app, announced today that XRP trading on crypto.com app in the US will be suspended from 19 January 2021. Crypto.com joined Coinbase and other cryptocurrency exchanges in delisting XRP amid growing concerns regards its status as a crypto asset after the SEC filed a lawsuit against Ripple. XRP price crashed more than 20% in the last 24 hours to reach $0.22.
Ripple will probably be dealing with a lot of issues for the foreseeable future. we recommend letting the dust settle before even considering purchasing any.
Ripple Issues Response
For those worried about their position in Ripple, and the crypto markets in general, the company has issued a response.
From their website:
The SEC’s decision to file this action is not just about Ripple, it is an attack on the entire crypto industry here in the United States. We’ve always said that there is a dangerous lack of regulatory clarity for crypto in the U.S. — their lawsuit has already affected countless innocent XRP retail holders with no connection to Ripple. It has also needlessly muddied the waters for exchanges, market makers and traders. The SEC has introduced more uncertainty into the market, actively harming the community they’re supposed to protect. It’s no surprise that some market participants are reacting conservatively as a result.
In the meantime, Ripple will continue to operate and support all products and customers in the U.S. and globally. The majority of our customers aren’t in the U.S. and overall XRP volume is largely traded outside of the U.S. There are clear rules of the road for using XRP in the UK, Japan, Switzerland and Singapore, for example. For eight years, we’ve built products that help hundreds of customers solve pain points around global payments — we will defend our company and look forward to settling this matter in court to finally get clarity for the U.S. crypto industry.
Those are fighting words!
Ripple raises some good points in their response, but we disagree. Ripple’s XRP was sold to investors for years as an asset. There is no question about it.
The fact is that Ripple tokens are are not mined like other cryptocurrencies. They were not generated as a reward for developing a block on a chain, nor were were they purchased from a miner.
Ripple, the company, distributed these coins as an asset, knowing that they would be opening themselves up for legal challenges.
However, the outcome of this lawsuit may be catastrophic for cryptocurrencies and the crypto space in general.
To be honest, we are very worried about this.
They have put the entire crypto movement at risk, because their actions will ultimately impact the future of cryptocurrency asset classifications.
Depending on the outcome of this lawsuit, cryptocurrencies may ALL be classified as securities and will be subject to the legal precedent of securities laws.
Time will tell, but this news is undoubtedly dangerous. We hope for the best, and are generally very bullish on crypto.
What are your thoughts on the subject? Tell us in the comments!
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