The cryptocurrency world is full of unique and questionable projects. The company Ripple created their revolutionary token called XRP, which potentially could change the world of banking as we know it. In this blog, I go over how this lawsuit started, why it’s significant, and what is currently happening, so check it out and let me know your thoughts.
The Back Story
In December 2020, the Securities and Exchange Commission (SEC) released what many might see as a bombshell of a lawsuit against Ripple Labs. This lawsuit has caused panic amongst many in the cryptocurrency community, and these sudden sweeping legal implications left many with questions.
The SEC was poised to sue (and still is, mind you) Ripple and two of its top executives for over seven years for trading its cryptocurrency known as XRP; the SEC agency has labeled it as illegal unregistered security.
The Significance
So now you have the backstory, and you might be thinking, “so what?!? Why do I care?” Good question: I thought you’d never ask!
So much attention around this lawsuit has much to do with XRP’s capabilities. Ripple’s cryptocurrency XRP will likely change the banking world as we know it, having designed a global payments platform with over 2 million active users.
As a company, Ripple is alleged by the SEC that it is a form of investment contract; XRP holders are using it as a long-term investment. These holders are looking to return on their investments. The SEC’s central argument is that it’s more like shares in a company.
If the SEC has its way, XRP will be excluded from the cryptocurrency market altogether, which has many people worried about what could happen. The other side of the coin is that the SEC’s timing is quite suspicious and seems like there could be something going on behind the scenes.
XRP Values Down
From the start, XRP’s value has declined, and with over 50 crypto exchanges delisting or suspending the currency, things don’t look good. Since December 2020, XRP has lost about 75% of its value since the lawsuit's announcement; it’s driven many XRP holders to dump the tokens and panic sell—leaving many outraged.
A law firm, CryptoLaw, has signed on 18,000 clients from the Southern District of New York intending to intervene in the SEC’s lawsuit. The lawyer, John Deaton, is challenging the suit stating the act was an “egregious, inappropriate action,” it sounds like things are about to get interesting.
The bigger problem for the SEC is that many countries like Japan, Singapore, the U.K., Switzerland, and the UAE have all decided XRP is a currency, not security. The problem comes down to the fact that SEC officials have given the rubber stamp and favored other tokens while at the same time treating Ripple much harsher. Time will only tell, I suppose.
But this could mean that many other cryptocurrencies could be next on the chopping block—potentially scaring away investors and creating unimaginable financial losses. But there is hope XRP is a widely accepted cryptocurrency by some of the world’s most significant national banks; this favoritism seems to be only growing and has yet to slow down.
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