Klever News: SEC suing Ripple to reverberate throughout crypto industry
The Securities and Exchange Commission (SEC) charges Ripple, two executives, with $1.3B sale of unregistered security, a lawsuit likely to have major implications on the wider global crypto industry.
Ripple, the company backing and developing the world’s 3rd largest cryptocurrency XRP, is officially being sued by the US Securities and Exchange Commission (SEC) over alleged sale of securities in the form of XRP coins.
The upcoming lawsuit by the SEC was first revealed by Ripple CEO Brad Garlinghouse in a series of tweets. The SEC then made public their highly detailed lawsuit on December 22, clarifying that the financial watchdog is charging Ripple and its two top executives, Garlinghouse and Chris Larsen, with conducting $1.3 billion of unregistered securities offerings by selling XRP to retail investors.
Outgoing US administration’s last moves
The fact that the announcement of the lawsuit was made by Ripple initially was likely an attempt to demonstrate that it is the outgoing US administration that is on a perceived crusade to disrupt the crypto industry on their way out the door. The SEC lawsuit comes just days after the US Treasury under Secretary Mnuchin announced proposed rules on disclosures of ownership over digital assets for exchanges and individuals when large funds are moved to self-custody wallets.
Ripple announcing the lawsuit themselves indicate that they wanted to control the timing of the announcement in order to have control of the narrative regarding the story and the case against Ripple. And to win time. SEC Chairman Jay Clayton’s tenure will end with the conclusion of the Trump presidency, as it is traditional for the SEC Head to hand the reins to a successor around the time of an election for President. So Ripple aims to take the lawsuit into the court of public opinion, perhaps even more so than in the courtroom.
But don’t get me wrong. What happens in this legal battle between the US government and Ripple will however reverberate in the entire crypto industry and its future, particularly on US soil. Then again, Ripple is probably the one entity in today’s crypto sphere that has the best conditions to battle the SEC for many months ahead, including the lawyers, the due diligence, the funds and backing.
Ripple comes away with a fine?
If Ripple is fined for instance, and not deemed a security (which would be a massive success for the company behind XRP after years of talks with the SEC), it opens up a lot of room for future crypto regulation as part of industry cooperation with incoming administration.
The next US government under Joe Biden and Kamala Harris is predicted to be more blockchain and crypto-friendly, or at least open to the idea. Voices in the Democratic Party, such as former Presidential Candidate Andrew Yang had a public policy proposal on cryptocurrencies and even raised the idea of using blockchain technology to distribute universal income to all Americans.
Ripple to be deemed a security?
If Ripple is deemed a security through an eventual final legal decision, it would outright hurt US businesses involved in fintech and crypto innovation. Meanwhile, the global competition would only continue to accelerate with the likely rollout of more open jurisdiction with regards to crypto in Asia, South America, Europe and the Middle East. XRP as a security would of course also demonstrate that other similarly built assets may meet similar definition and fate.
There is an apparent and urgent need for clarity from the US government on regulation regarding bitcoin, crypto and blockchain as an industry. If there will not be any relevant legislation, innovation will not be free to grow on American soil. US talent will simply need to move away from US jurisdiction to more blockchain-friendly regions and countries to prosper and grow.
Crypto ought to be treated like cash
Cryptocurrencies and digital assets, including XRP and many others, should not be deemed securities by the use of an 87-year old securities act from 1933 that has no relevance in today’s digital transformative economy utilizing peer-to-peer and blockchain technologies. Old laws need to adapt to the challenges and opportunities introduced by new technologies. Instead, to simplify the way forward to regulation, most cryptocurrencies should be treated the same way that cash is treated under the law today.
Director of Communications and Marketing at klever.io.