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With many token issuers, they tend to make a plea bargain when it comes to the Securities and Exchange Commission, Airfox and Paragon are good examples, but there are other ways to circumvent it for cryptocurrencies.
When it comes to Ripple, they play the long game with the SEC. By rapidly pushing their digital currencies towards full functionality, cryptographic companies like Ripple will be able to create enough "Facts on the ground" escape a classification of titles altogether. Ripple is a great company, though, almost everyone will have already heard of the company in the crypt space, but even so, Ripple is quickly becoming the type of prey that is almost too difficult to manage.
Is XRP decentralized enough for the SEC?
The idea of decentralizing an entire entity outside of a security was noted at the top of Yahoo Finance at the beginning of the year when SEC's William Hinman issued a public statement in which he classified Ethereum and Bitcoin as titles "It would seem to add little value." In addition to this, "Over time there may be other decentralized networks and systems where the regulation of tokens or coins that work on them as securities may not be required." Hinman's speech is the closest we will get to normative clarity in today's world.
The declaration indicates that there are numerous cryptocurrencies that can escape a classification of securities becoming sufficiently developed and distributed that they are no longer oriented to the main effort. In a report for the Lowell Milken Institute, James Park refers to this as to Hinman's Paradox:
"In order for a utility to be freely distributed without regulation from securities laws, it must be functional, but many utility tokens are functional only if they are distributed enough in such a way as to create a decentralized system."
According to Park, there will be very few initial offers of coins that will never be sufficiently decentralized to escape the "Hinman paradox". Based on what is publicly known of the SEC enforcement strategy, the Ripple native token, XRP is one of the best able to become decentralized enough to cross the threshold.
As reported by Crypto Briefing:
"While regulators like Hinman and Valerie Szczepanik have entertained the possibility of utility tokens that are not securities, the overwhelming majority of ERC-20s certainly are."
What are your thoughts? Let us know what you think in the comments below!
