Ripples XRP explodes nearly 60% – what’s behind the pump?
The last few months have been challenging for holders of Ripples XRP. The cryptocurrency crashed in price while the other top cryptocurrencies by market cap experienced price growth not seen in years.
The drop in the price of Ripple’s XRP is due to charges brought against Ripple Labs and two of its executives in December. The SEC’s charges involve of Profit Revolution app the sale of over $1 billion in unlicensed securities based on the sale of Ripple’s XRP. The SEC alleges that Ripple’s XRP is a security – a designation not assigned to the two major cryptocurrencies, Bitcoin and Ether.
This announcement led to a more than 50 percent drop in prices, as many platforms that used RippleNet and Ripples XRP ceased operations due to these allegations. These platforms are not regulated by the SEC and intend to remain so.
As such, these allegations could bring them under US jurisdiction if they are involved in selling securities to users. Even regulated firms like Grayscale, the largest digital asset manager in the cryptocurrency space, reduced XRP holdings after the announcement.
Ripple fights back
Many stakeholders in the XRP ecosystem were extremely upset by these claims. Some filed petitions.
Some targeted the SEC for waiting seven years after Ripple’s XRP launch to take action. Others sued platforms like Coinbase for allowing unregistered sales of securities.
Aside from all the drama surrounding these allegations in late 2020, Ripple has responded legally to the allegations. In the filing, they claimed that the charges are based on an „unprecedented and ill-conceived legal theory – with no statutory mandate or authorisation from Congress“.
Ripple says XRP is not a security
The legal team at Ripple Labs states that Ripple’s XRP is not a security. They base this on the fact that „XRP performs a number of functions that are distinct from the functions of „securities“ as the law has understood that term for decades. For example, the token functions as a medium of exchange […] It is not a security and the SEC has no authority to regulate it as such.“
Ripple Labs, Brad Garlinghouse and Christian Larsen claim that because the token functions as a „currency“ that is a means of storing and transferring value, the SEC has no jurisdiction over it as a security.
However, Ripple Labs and the other two defendants allegedly sold over $1 billion of Ripple’s XRP to fund their businesses – and for personal reasons. This has traditionally not been possible with a privately issued „currency“. For now, Ripple’s XRP (Go to Buy Ripple Guide) will remain in limbo, but it should be very interesting to see how the SEC reacts.
However, the crypto community seems happy that Ripple is officially responding – at least if price is any indication.