Grayscale Investments has begun the dissolution of its XRP Trust amid an ongoing legal battle between the US Securities and Exchange Commission and Ripple.
The investment firm confirmed that it has officially liquidated its XRP holdings and will dissolve the XRP Trust over concerns around the difficulty of being able to convert the cryptocurrency into US Dollars in the near future.
In December 2020 the SEC made headlines as it announced its intent to launch a lawsuit against Ripple, CEO Brad Garlinghouse and executive board chairman Christian Larsen for what it deems to be an unregistered security offering of XRP over the past six years.
While Garlinghouse and Ripple have made compassionate pleas to the wider cryptocurrency community to allow the firm to prove its case against the SEC’s claims in court, cryptocurrency exchanges and service providers have moved quickly to limit the damage from the ongoing windfall of the looming legal battle. The case is due to begin pre-trial proceedings in February 2021.
The repercussions of the SEC’s move to nail XRP have been strongly felt across America in particular, with a swathe of the biggest cryptocurrency exchanges moving quickly to either suspend trading of XRP on their platforms or completely delist the token. Coinbase is facing a separate lawsuit for allegedly receiving commissions from illicit XRP sales going on the basis that the tokens are deemed to be securities.
Grayscale washes its hands of XRP
Considering the fallout of the SEC’s lawsuit, it’s not surprising that Grayscale has moved swiftly to mitigate the damage of holding onto XRP. It is difficult to say what the end outcome will be and exchanges and investment managers are doing their best to protect themselves, investors, traders and users from any worst case scenarios.
Given that many exchanges have delisted XRP, Grayscale has concluded that it will be increasingly difficult for US investors to continue to be able to convert XRP into dollars in 2021.
Grayscale has already liquidated the XRP Trust’s holdings and has indicated that it plans to share the net cash proceeds to shareholders of the Trust. It’s understood that this will be done after deducting expenses, providing reserves and other processes. Once proceeds have been paid out – the XRP Trust will be dissolved completely.
At the beginning of December 2020, before the SEC’s lawsuit against Ripple had come to light, the Grayscale XRP Trust was worth $22.8mln. This was the highest valuation of the Trust that month.