Excellent John K. Kumi is a cryptocurrency and fintech enthusiast, operations manager of a fintech platform, writer, researcher, and a huge fan of creative writing. With an Economics background, he finds much interest in the invisible factors that causes price change in anything measured with valuation. He has been in the crypto/blockchain space in the last five (5) years. He mostly watches football highlights and movies in his free time.
The US Securities and Exchange Commission (SEC) has been revealed to be on the verge of suing Ripple Labs for illegal sales of securities. This put them in the same bracket as companies that suffered a similar fate like Kik Interactive Inc.
Brad Garlinghouse, the CEO of Ripple Labs Inc revealed in an interview that the SEC lawsuit is imminent, and he with Chris Larsen, Ripple Co-founder, would be named as defendants. When asked about their action, Garlinghouse disclosed that they will fight back. According to him, this is an attack on the entire cryptocurrency industry. Not just that, it is an attack on American Innovation.
The question of XRP being a currency or security has been the center of discussion after the SEC defined the status of Bitcoin and Ethereum tagging them as currencies. XRP, on the other hand, though has got worldwide users is not as decentralized as Bitcoin, and it is controlled by Ripple, making it difficult to define its status.
“Clayton did this with one foot out the door. Rather shamefully, he has decided to use Ripple, and leave the legal work to the next chairman,” said Garlinghouse.
The legal struggle between Ripple and SEC could have an implication on the cryptocurrency market, though it will be the final solution to the question, “Is XRP a security or currency.” A similar case between Kik and SEC was resolved by the court after the messaging app issued a token that SEC tagged as security. In the long run, the court declared it as unlicensed security.
Garlinghouse has a lot to say about the lawsuit and expressed his disappointment in the agency and its chairman, Jay Clayton because he and other senior members started this process while leaving office as part of the presidential transition.
“Clayton did this with one foot out the door. Rather shamefully, he has decided to use Ripple, and leave the legal work to the next chairman, ”he said.
He believes that the Trump administration has been generally hostile to cryptocurrency as he expects things to improve under the new administration. Ripple even contemplated taking its headquarters outside the US after suffering from attacks from regulators.
Why SEC Thinks XRP is Illegal Security?
Bitcoin and Ethereum are fully decentralized and have no third parties in control of them, hence making the SEC dismiss them as securities. XRP on the other hand had 100 billion units pre-mined with Ripple boasting of a larger share coupled with the ones owned by Garlinghouse and Larsen. It is said that 1 billion units are released into the market every year. This makes people believe that XRP is controlled by Ripple or probably treated as the stocks of a company rather than a currency.
Ripple defends this claiming it does not go into the reserves as it pleases. According to Ripple, banks and merchants have over the years used it as a bridge currency, and has become more decentralized in its use for cross border transactions.
Garlinghouse has assured that they will fight and defend the cryptocurrency industry from the unfair treatment by SEC.