Ripple Is Making Mark Beyond XRP; Could Spur Regulatory Clarification from SEC
When many people hear the word cryptocurrency, they think of Bitcoin. Launched in 2009, the token created the cryptocurrency space. Its launch also paved the way for hundreds of other tokens, including Ripple’s XRP token.
Here, we’ll examine Ripple and XRP by pointing out key developments as well as the pros and cons of the platform and token.
Ripple’s Claim to Fame
XRP made its debut in 2012. The creators of these tokens, which are also known as a digital assets, set out to decrease the amount of time it takes financial transactions to be processed.
Their efforts resulted in the creation of the XRP Ledger. Ripple boasts being the only enterprise blockchain company of its kind. Its global network helps businesses send money with the aid of blockchain. The network uses the XRP Ledger and the XRP token to improve payment services.
Developers can build their solutions on the XRP Ledger. In turn, according to Ripple officials, financial institutions can significantly improve the speed, cost, and reliability as they relate to how people conduct financial transactions around the world. Ripple notes that its open-source, permissionless, and decentralized blockchain technology can settle transactions in three to five seconds.
Considering traditional payment processing systems can take days, this is clearly groundbreaking. Furthermore, XRP can be sent directly. No central intermediary, such as a bank, is needed.
The Ripple Difference
People who are not familiar with the cryptocurrency space may believe all tokens are the same. They may see them all as simply different variations of Bitcoin. Ripple’s XRP is an example of how that is not the case at all.
A difference between Ripple’s XRP and other tokens, such as Bitcoin and Ethereum relates to how XRP tokens are created. Unlike most tokens, Ripple’s XRP capital raise did not stem from an initial coin offering (ICO). According to the company’s CEO Brad Garlinghouse, Ripple did not have an ICO.
Ripple and the SEC
On its website, Ripple proclaims that its global payment solutions “are helping transform how vulnerable populations, remitters, and small businesses worldwide, send and receive money across borders.”
To the U.S. Securities and Exchange Commission, Ripple’s founding was suspect. At the end of 2020, the regulator announced it was suing Ripple alleging that more than $1.3 billion was raised through an unregistered, ongoing digital asset securities offering. The lawsuit specifically named the company’s co-founder Christian Larsen and its CEO Bradley Garlinghouse.
Observers of the cryptocurrency space see the case between Ripple and the SEC as a potential gamechanger because it could force the regulator to finally say: “yes tokens are securities, or they are not.” Speculators were betting that a ruling could come as soon as 2022.
SEC Fallout
Prior to the SEC lawsuit, Ripple’s business model was propelling it to be one of the leaders in the cryptocurrency space. It had clawed its way to having the third-largest market capitalization in the cryptocurrency space.
However, when the lawsuit was announced, XRP’s value plummeted. It now ranks number eight with a market cap that hovered around $37 billion at the beginning of February 2022. Bitcoin ranks number one with an $807 billion market cap, and Ethereum is second with a market cap of $367 billion.
Despite the market cap drop, Garlinghouse has been optimistic, At the end of January 2022, he referred to the headwinds in play due to the SEC’s lawsuit as being crazy and he admitted that it caused some customer losses. No matter, Garlinghouse said Ripple was starting 2022 in a “great position of strength.” He noted that the company had over $1 billion in cash.
Trading XRP
Following the SEC’s announcement that it was suing Ripple, things took a turn for the worst for how XRP could be traded. For example, the number of exchanges that allowed for XRP trading decreased. Coinbase, one of the world’s largest cryptocurrency exchanges, was one of those that suspended XRP trading.
Specifically, Coinbase no longer allows account holders to sell their XRP tokens or trade/convert them for fiat. Holders can still view their XRP balance; deposit XRP into their accounts; and send XRP to wallets they have outside their Coinbase accounts. According to its website, no date has been set for the lifting of the suspension.
Conclusion
As cryptocurrencies have steadily gained more attention over the years, more people are learning about the many nuances that separate them from the most popular cryptocurrency — Bitcoin.
Ripple has been no exception.
The Ripple creators of XRP bucked the traditional cryptocurrency platform methodology. No ICO was held, and its tokens were not mined. Ripple set out to create a payment processing system in which transactions are settled faster and cheaper than the systems for other cryptos.
As the company flourished, the U.S. Securities and Exchange Commission was keeping a watchful eye. The regulator eventually filed a lawsuit against Ripple alleging that it raised its funding “through an unregistered, ongoing digital asset securities offering.”
Ripple is defiantly fighting the allegation, but the outcome may not just benefit Ripple. It could also be a gamechanger for the cryptocurrency space in terms of forcing the SEC to clarify if cryptos are securities are not.