In a recent turn of events, the Securities and Exchange Commission filed legal action against Ripple for illegally pursuing an unregistered security offering. The fourth-ranked cryptocurrency managed to accumulate $1.3 billion since 2013 through the digital asset sale. Going by the legal action, SEC claims that Ripple’s native asset (XRP) should be treated as a security rather than a digital currency.
Raising funds was necessary to fund the company’s endeavors while under the control of two significant executives, CEO Brad Garlinghouse and co-founder Chris Larsen. According to the SEC, the two personally went ahead to run a private XRP sale worth $600 million.
More Details Concerning the Lawsuit
Typically, companies intending to carry out a public offering need to follow the federal guidelines by registering the digital assets. Therefore, SEC’s argument is based on Ripple’s failure to meet the agency’s legal obligations and sold most XRP tokens to buyers globally. As per SEC, Ripple’s move does not reveal its business undertakings to potential investors who buy the digital asset.
Registering XRP fulfills the protection-provisions that drive the market to invest with the company since individuals know who they’re dealing with. Ripple violates the registration provisions of the Securities Act of 1933, which prompted the SEC to move to a federal district court in Manhattan.
Ripple Rebound on The XRP Case
Ripple came up with factual arguments on why XRP is a digital currency and not a security SEC suggested. For starters, users have the freedom to invest with Ripple by buying shares from the company and not purchasing the XRP itself.
The digital currency does not accompany any voting rights or a share in Ripple’s profits since the company and XRP don’t relate in any way. When you acquire XRP, it comes purely as an asset whose prices change with the shift in other digital currencies.
Ripple, together with SEC, had conflicting ideas to do with XRP as one party terms it as a security while the other refers to it as a currency. However, Ripple seems determined enough to prove that they are in line with the current laws.
The company also mentions that some government bodies like the Treasury Department’s FinCen and the Justice Department approve that XRP is a currency. All these wrangles come when Ripple is looking forward to moving their headquarters away from the U.S.
Exchanges Delist XRP
XRP values plunged since the commission visited the federal courts. Currently, the digital asset value stands at $0.2239 from the time of writing, dropping from the previous $0.3479 on December 25, 2020.
Later on, a few exchanges decided to withdraw XRP from their systems as Ripple continues to be in the spotlight. Below are some of the exchanges taking part in the delisting process over fears that XRP’s parent company conducts an unregistered issuance.
Coinbase
Coinbase runs as a world-leading cryptocurrency exchange boasting over 35 million legitimate users. The platform offers services evolving around managing an investor’s portfolio as well as facilitating the buying and selling of digital currencies.
In an announcement made by Coinbase, the exchange plans on removing XRP from its network effective January 19 2021. The alert by Coinbase came in moments after the ongoing action against Ripple.
However, Coinbase maintains that the deposit and withdrawal operation will be unaffected by the delisting process. Flare Network’s spark token airdrop is an additional program that will remain in play for qualified XRP holders.
Coinbase strives at supporting an array of digital assets while examining them with procedures such as the Digital Asset Framework. Hence, the XRP suspension from trading was rather unfortunate as the exchange tries to design an open and compliant financial ecosystem. Coinbase remains on the lookout promising its users an update regarding the lawsuit.
Binance
The U.S based exchange is built on cutting-edge financial technology hosting many digital assets, including XRP. Even so, the exchange ecosystem still wishes to discontinue XRP from its system pending the present legal action.
In a notice issued by Binance, the exchange clearly states that XRP will be eliminated from the system as of January 13 2021. Therefore, all deposits and trading will be disabled besides withdrawal services, which may remain operational.
Similar to Coinbase, Binance plans on allowing its customers to claim for their Spark token airdrop. Furthermore, users who just bought the digital asset via debit card can access their funds once the holding period lapses.
OKCoin
OKCoin is yet another prominent exchange providing an advanced trading network for digital currencies. The platform saw it best to call off any trading or deposit activity by January 4, 2021, after closely watching the SEC lawsuit.
However, before the suspension date on January 3 2021, the exchange company instructs XRP/USD borrowers to return the lent value. Otherwise, OKCoin will ultimately halt every margin and spot trading undertaking.
The exchange recognizes that the Ripple case may go on for a long time without finding a way forward. Even with the Ripple turmoil, OKCoin will take a stand later on and alert its users after receiving credible legal information.
Bitstamp
At the core of Bitstamp’s functionalities lies a fully compliant system focused on adhering to the consumer protection laws. The ecosystem took to Twitter, elaborating that it will cease the trade and depository services of XRP starting on January 8 2021.
Like every exchange platform, the reason for delisting is due to the new SEC action against Ripple. According to Bitstamp, the new modifications will only affect Americans, and it will implement new changes depending on the lawsuit’s outcome. Moreover, Bitstamp will eliminate any open orders as it enables withdrawal services to continue operating.
Bottomline
XRP’s future remains uncertain, especially after more extensive crypto exchanges delist the digital asset. The value of the digital currency is already hanging on a thread and may continue to suffer if the SEC continues to pursue the case. Ripple, however, is not willing to give up on its customers, employees, or shareholders.
This case clearly reflects on the future cryptocurrencies hold with the government. Meanwhile, only time will tell how far Ripple can go to secure its place within a particular jurisdiction with power over the overall financial market.
