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With the recent announcement of the SEC, fear has spread through an already weak market, with the fear that many ICOs in recent years will meet the end at the hands of the SEC because each of them is considered an unregistered security.
Ripple Labs, the creators of XRP, has dismissed the accusation for a while, crushing it away like an annoying insect. But alas, the SEC has launched its surrounding network, and XRP lies somewhere inside it waiting for control of the agency. As Ripple is managing that reality leaves something to be desired.
In 2018, Ripple Labs began trying to co-opt the narrative around the creation of XRP and the relationship between Ripple and XRP to defuse the idea that XRP is a security. Investors should be worried about this because the attempts at Ripple Labs seem less like cooperation with the SEC and more like deviation and denial.
In June, the chief executive Brad Garlinghouse in particular made these arguments about the fact that XRP is a title:
- "If Ripple closes the company tomorrow, the XRP register will continue to operate – it's an open source and decentralized technology that exists independently of Ripple."
Yes, if Ripple went off, the XRP would still exist. But the same could be said of any coin or token with even a single motivated proposer with a computer. Decentralized? The fact that Ripple still owns 60% of all XRP has created controversies that they claim.
- "People who buy XRP do not think about buying Ripple shares.There is a company called Ripple.We're a private company.We have investors, … but buying XRP does not give you ownership of Ripple. it gives you access to dividends or profits that come from Ripple. "
I'm pretty sure that making a general statement about what people "think they're buying" will not convince the SEC of anything. More importantly, it is also making a fundamental mistake in thinking that the way money works (if investors retain property rights, dividends or profits) is the only thing that can make it a security. Nobody has presented this case against XRP. In fact, the SEC has explicitly stated that it is more concerned with how the money is raised.
- "XRP is solving a problem.There is no use in a security."
His argument is that the titles do not solve the problems? What if a currency has utility can not be a security? That's not how it works. He should have consulted with a securities attorney before speaking.
There is a very large and very vocal Ripple community that will come out en masse to defend it. They will repeat these topics and more, but their repetitive arguments always leave unanswered questions.
"Ripple Labs did not create XRP and was given to them".
Of course, it was given to them alone. The founders of XRP created it and then gave it to themselves as Ripple Labs. Later in the day, the founders of Ripple proudly claimed to have created XRP. Then, years later, they disowned him after they realized they would be in danger. The distinction between the creation and the "gift" of billions of dollars of XRP will be lost on the SEC.
"Ripple Labs and XRP are not the same thing." Yes, but then why has Ripple Labs continuously promoted XRP since the beginning? Because they have something to gain from its increase in value. But it would be a security, so they will not say it this way. If they have to be careful how they answer this question, it's because they have a problem.
"XRP did not have an ICO." Maybe. But the SEC has no language in its regulations on the ICO term. It does not matter what you want to call a coin. The SEC cares only about what investment you are selling and how.
There are other topics, but they are all incomplete or irrelevant. What comes is the Howey test.
Is it a money investment? Yup.
C & # 39; is a 'profit expectation? Duh.
Is it a joint venture? Yup.
Does the investment relies on the efforts of a promoter or a third party? Yes, Ripple Labs.
They have developed and are promoting it. Defenders of the XRP will repeat to nausea how many banks are trying the Ripple protocol and why this will make the price of the moon XRP. Does not it seem that investment depends on Ripple Labs efforts?
How about Ripple's words on this:
"Ripple Labs is the creator of Ripple, we have developed the protocol and its distributed payment network, and now we are working to support and promote its growth."
"The company will maintain a share with the hope of creating a solid and liquid market in order to monetize its only resource in the future."
Ripple created the coin and then sold it to build its platform and finance its operations. This is a security according to the definition of the SEC. It's a security according to Howey's test. Ripple's attempts to distort or otherwise obfuscate this truth betray the fact that they know it should be a security.
If most of these transgressions ended in 2014 or 2015, it could be a controversial point and no longer a security, like Ethereum. But the fact that they currently own the majority of XRP, and continue to promote it, and still sell it to fund their operations (worth $ 163 million in the last quarter), is a big deal.
If the SEC determines that XRP is a security, it will require compliance, including registration to the agency as security and payment of a fine. Ripple should be able to do all this without too much difficulty. However, the SEC also requires issuers to repay investors. Ripple could have a much harder time, depending on how the SEC wants to handle it.
And the optics of this process would be negative for the price of XRP.
For his sake, Ripple Labs would be better to be in close contact with the SEC on this. If they are waiting for the SEC to make the first move, they could end up being much more expensive for them.
For XRP investors, be prepared for a price shock if the SEC issues an indictment against Ripple. The market is shaky and is likely to react to something negative right now.
Investors should also worry about how Ripple will manage it publicly. There is an ongoing lawsuit of class action by XRP investors against Ripple Labs that XRP is a security.
Ripple should openly acknowledge the perception of a problem rather than being contemptuous. Ripple should be proactively engaged with the SEC, and the public must see it. There are too many ways Ripple could lose right now. This is the narration that must be controlled. It could lose in court or lose the SEC, and the XRP could still survive. If Ripple loses public opinion, instead of the moon, Ripple Labs' only "asset", XRP, ends up in an abyss.
