Ripple, which is a prominent crypto-currency firm, has been brought to book, for undertaking investments, without being licensed properly by the US Securities and Exchange Commission.
Even though, the SEC (Security and Exchange Commission) does acknowledge that XRP token, product of Ripple, is a tradable asset, regarded as a security and is therefore subjected to its book of rules and regulations.
One its front, the firm Ripple puts forth argument that XRP is a currency and is not entitled to be registered like an investment contract.
Following the news-break, the value of XRP plunged by 30 %.
For digital currencies, there is yet another US regulator, the Commodity Futures Trading Commission (CFTC) which brings up distinct rules for it.
As a legal course of action, Ripple’s chief executive Brad Garlinghouse, and Chris Larsen who is ex-chief executive, have both been covered under the charge of Securities Act violation.
In words of Mr. Marc Berger, deputy director of watchdog’s enforcement division, “We allege that Ripple and its executives failed over a period of years to satisfy [the SEC’s] core investor protection provisions, and as a result, investors lacked information to which they were entitled,”.
To reach out to masses with his side of the story, Mr. Garlinghouse reacted in form of a blog which came out from of his lawyers, who mentioned, “”The SEC is completely wrong on the facts and the law and we are confident we will ultimately prevail before a neutral fact-finder.”
Not mincing words, huge amount of trade, measuring to the tune of billions of dollars is brought to accounts everyday and therefore, lawyer resumed, such should treated like any virtual currency such as Bitcoin is.
In drawing such a wide distinction, Mr. Garlinghouse went far enough to accentuate that Ripple has nothing much in common, as it is a popular system of payment banks use. “Ripple our company has shareholders: if you want to invest in Ripple, you do not buy XRP but rather shares in Ripple.”
He later reflected in tweets, “The SEC should not be able to cherry-pick what innovation looks like. This battle is just the beginning.”
As it is designed to function differently inherently, XRP is now regarded as the third widely prominent crypto-currency, after Bitcoin and Ether. Founded by Ripple, which designed a payment framework, used by financial institutions especially banks, in a bid to expedite inner payment processes. Further, on one hand where Bitcoin is preserved in decentralized system and “mining” has to be done for it by making use of wider network of sophisticated computers spread across the world, but Ripple is in full control of XRP and it issues coins every month. However, this is noticeable event that Bitcoin and Ether have been driven out of trading exchanges which largely deal in trade of stocks and bonds.
That was proclaimed in 2018,by the US Commodity Futures Trading Commission Bitcoin and Ether could be brought into trading practice like any other commodities like currencies, oil or cotton.
Such a scenario gives rise to a debate as to if crypto-currencies should be considered at par with stock and securities and hence, should there be any governing body to look after its implementation and to regulate it, just like SEC?
Clearly, regulators of security will give an approval to this crypto-currency XRP when the former allows it to trade like a stock or bond and this would bloom into a voluminous usage and would seek more investment too, eventually.
However, it would also implicate that it would need to be ejected from currency exchange listing else such centres would be registered as security exchanges.
Whatever the outcome may be, but at present, the value of one of the prime crypto-currencies of the world, tumbles steeply with the SEC complaint happens to be the major cause of such a down-fall. Going by the CoinMarketCap, the worth of XRP token has gone down by over 42% in last one day alone and calculating it by a month, it is beneath 63% low it is simply like a sitting-duck at $0.27.