The legal battle between the United States Securities and Exchange Commission (SEC), and Ripple, the company behind XRP, continues. And it is that, after the SEC filed a lawsuit against Ripple for allegedly selling assets illegally for years. Now Ripple is responding to the SEC’s lawsuit, arguing that XRP is not a financial asset or a form of investment. If not a virtual currency with a clear utility.
The lawsuit against XRP
The quality of cryptocurrencies is one of the most complicated issues for the American legal system. And it is that, from the point of view of regulatory institutions such as the SEC. Cryptocurrencies would essentially be financial assets that require registration and supervision by the institution. Just like any stock, bond, future contract, or other traditional financial product.
This is the reason why Telegram had to abort the launch of Telegram Open Network (TON) its own Blockchain. After it was determined that the pre-sale of millions of Grams, which was to be Telegram’s cryptocurrency, constituted an illegal sale of financial assets.
Now, Ripple would be facing the same problem regarding Ripple. After the SEC argued, in a lawsuit filed against the company in December, that it had illegally sold $ 1.3 billion in XRP over seven years, promoting the token and paying for the support and advertising of third parties.
Ripple responds in court
Of course, Ripple has not stood idly by. Responding to each of the SEC’s arguments in a 93-page document. In it, Ripple focuses on demonstrating that its cryptocurrency, XRP, would not be a financial asset that guarantees any right to investors, but rather a virtual currency with a utility in itself, and beyond its value in the financial market.
In addition, Ripple would also mention the agreement reached in 2015 with the United States Department of Justice and the Financial Crimes Enforcement Network. In which XRP was registered as a convertible virtual currency, which opened the doors to carry out operations with XRP in secondary markets.
«The functionality and liquidity of XRP are totally incompatible with securities regulation. To require XRP to be registered as a security is to undermine its primary utility (…) The lawsuit mischaracterizes the advice Ripple received in 2012, from which a reasonable reader would have actually concluded that Ripple Credits (a former name of XRP) were not a value». It can be read in the document.
Although now that Ripple is responding to the SEC’s lawsuit, it certainly has a better chance of winning the lawsuit than Telegram did at the time. This conflict demonstrates the inadequacy of US cryptocurrency regulations to cope with the needs of this growing market.