Cryptocurrency

The Rippling Debate Over “Security” Whipsaws XRP Token

Is Ripple – specifically the XRP token – the platypus of the crypto world?

Turns out the debate over whether it is or isn’t a security is having a knock-on effect: It’s making the XRP token’s price less than … well, secure.

The XRP token’s value is now below $0.50, which means new lows and a shadow of a $3.40 peak.

As reported by Express in the United Kingdom, there are rumors afoot in crypto land. Rumors that the token can and will be classified as a security here in the States.

It may be such a designation that scares holders and would-be buyers of that token, and the Securities and Exchange Commission (SEC) has yet to weigh in – but weigh in it will.

The company told Express that “everyone is free to say what they want or pursue their own agenda in the media, but ultimately the facts around XRP will win out over uninformed speculation … XRP doesn’t give its owners shares in Ripple, the XRP Ledger is decentralized among 150+ independent validators – Ripple operates only 14 of them – and XRP would continue to exist even if Ripple disappeared tomorrow.”

Thus: Do not call it a security as, among other things, owning it does not give ownership in Ripple.

OK, that’s a bit broad, and the debate may be hashed out in court, or settled by the SEC. But in the meantime, the impact has been felt.

Sales Slide…

Consider the fact that the second-quarter XRP Markets Report, which came out this month, notes that Ripple sold $75.5 million of XRP, down by half from the previous quarter, which the company has attributed to a bear market, even though it has signed up more customers in the quarter (dry powder, perhaps?).

The volume and price was consistent across the majority of digital assets, as many moved with tight correlation,” the report noted.

But XRP’s issues are a bit different than just being painted with a broad brush, as lawsuits abound, zeroing in on the very nature of what the token is and is not.

In just one of the latest, a suit filed earlier this month in California has said the token was born to fund Ripple operations, and the token sales have had “all the traditional hallmarks” of securities – all except the registration as such. Changing hands, with money as a go-between for the selling and buying – as well as the anticipation of profits – means that this is a security, allege folks who are suing for damages tied to the price of the XRP token (specifically, its drop).

If the SEC states that XRP is indeed a security, then regulation becomes (ostensibly) more onerous, taxes become more rigorous on capital gains … and among other tenets, XRP is sold on a number of exchanges, between passive investors (Ripple issues the XRP that it has).

Ripple calls it an “independent digital asset.” To which we reply, if it walks like a duck, quacks like a duck and trades like a security … The currency argument is one that is still open, too, as there is no definitive store of value here. The tokens are touted by some enthusiasts (among them TechCrunch founder Michael Arrington) as a low-cost and efficient way to move money.

One way it’s moving money right now? Might we assume that people are jumping off here, and oh, bidding up bitcoin? We’re being only slightly humorous, as the price of that latter, marquee crypto has been finding firmer footing.

Investors do not like uncertainty, and that’s the ripple effect for Ripple’s token right now.

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