The position of some of the major cryptocurrencies available to say in relation to the SEC’s jurisdiction is a major talking point. Bitcoin has been officially given the all clear, and Ethereum similarly, but XRP has been at the heart of this debate for some time.
In fact, Ripple, the company behind XRP has been embroiled in various lawsuits accusing it of selling unregistered securities, talking about an early XRP ICO sale. The fact that the major portion of XRP is held by Ripple Labs makes it subject to questions about it being somewhat centralized.
But, in general, there has been no clarity given on the designation of XRP as it stands currently, or any other cryptocurrency really unless it is taken on and dissected by the SEC to determine if it would fall under securities law.
This ambiguity means there is a lot of interpretation and uncertainty about where certain cryptocurrencies stand, including XRP, but for Chris Giancarlo, who was chairman of the CFTC until last year, he believes it is not.
For the former chair, in an op-ed for the International Financial Law Review, he said:
“XRP should not be regulated as a security but instead considered a currency or a medium of exchange,” he wrote with Conrad Bahlke of international law firm Willkie Farr & Gallagher. They said XRP doesn’t hit any of the “prongs” of the Howey Test – a landmark case that defines what is considered a security in the US.
Giancarlo and Bahlke both state that XRP was never put forward as a security, nor were the investors in its early stages promised any returns. Rather, the token has a very specific use case for liquidity and settlements and the company, Ripple, never offered holders any rights of ownership or share of the profits.
There’s no investment contract or formal relationship that exists between Ripple Labs and XRP token holders which also further pushes the narrative that it was never designed to be a security.
A need for clarity
The arguments put forward by the likes of Bahlke and Giancarlo are of course quite sound and make a lot of sense, but at the same time, some of the securities lawsuits that Ripple is facing are also coherent.
The real issue seems to be around the lack of full regulation and certainty on the securities law and major cryptocurrencies. Current ambiguity leaves the likes of XRP up in the air where a sudden decision could bring the entire thing crumbling down.