Ripple Labs vs. the SEC
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The recent crash in cryptocurrencies was due to a number of factors, but one of them has taken on much more significance: Increasing regulatory oversight. Crypto mining and trading have long been a sort of wild west industry, with proponents touting its unregulated and decentralized nature. That could change with a case working its way through the courts.
XRP is a cryptocurrency from Ripple Labs Inc. In December 2020, the Securities and Exchange Commission (SEC) sued, accusing it, as well as CEO Brad Garlinghouse and co-founder Chris Larsen, of having sold $1.3 billion worth of XRP in “unregistered digital asset securities sales” beginning in 2013. Countering, Ripple Labs says XRP, as a cryptocurrency, is outside of the SEC’s jurisdiction.
Whether true or not, several cryptocurrency exchanges were spooked over possible regulatory agency interest in their operations and suspended trading of XRP. This resulted in class action suits brought by justifiably angry investors.
One thing at stake for XRP is a planned IPO that has been put on hold, although the suggestion for the IPO was made by Ripple’s largest shareholder, SBI Group. A win by the SEC could negatively affect and possibly prevent the IPO from happening. But that’s a worry for Ripple, whereas a win by the SEC presents a problem for the entire cryptocurrency industry. Garlinghouse noted that if Ripple loses the lawsuit against the SEC, most tokens trading on cryptocurrency exchanges would be similarly deemed securities and will have to register with the regulator. That’s something the industry has been fighting.
Garlinghouse also has mentioned that if Ripple loses, he may have to relocate the company/currency operations to another country. Just recently, Ripple announced it had opened an office in Canada.
Then again, some regulation could give a boost to cryptocurrencies. When the banking industry was more tightly regulated during and following the Great Depression, confidence in banks was boosted, deposits increased, businesses and people could bank and borrow with confidence, and failures became much rarer. If something like that happens to crypto, there may be more places that accept it as currency. As it is now, it’s very difficult to spend cryptocurrency.
Who will win?
There’s no way to be certain, but there seems to be some skepticism of the SEC’s case by the judge in the case. Sources say that judge is losing patience with the government’s team flip-flopping on issues and stonewalling on producing requested documents. A win for Ripple could mean a bull market for XRP and a leap up in price. Stay tuned.