Ripple is responding to the lawsuit that the SEC filed against it for selling financial assets illegally. In an agreement with the US Department of Justice and the FinCEN, the firm registered XRP as a convertible virtual currency.
The US Securities and Exchange Commission (SEC) and Ripple, the company behind XRP, are still waging a legal battle. The SEC filed a lawsuit against Ripple for the alleged illegal sale of assets for years.
Currently, Ripple is responding to that lawsuit, arguing that XRP is not a financial asset or a form of investment. They assert that it is not a security but a useful virtual currency.
Within the legal system of the United States, the qualities of cryptocurrencies are one of the most complex matters. The SEC considers cryptocurrencies to be financial assets that require registration and supervision. They would do it in the same way as with any stock, bond, futures contract, or other traditional financial products.
For this same reason, Telegram had to suspend the launch of its blockchain Telegram Open Network (TON). The SEC determined that the pre-sale of millions of Gram, which would be Telegram’s cryptocurrency, constituted an illegal sale of financial assets.
Right now, Ripple is facing the same problem with its crypto-asset XRP. The SEC argued in its lawsuit that the company had illegally sold USD 1.3 billion worth of XRP for seven years. Furthermore, they alleged that they had been promoting the token and paying for third-party support and advertising.
Ripple’s Response at the Court
Of course, Ripple has responded to each of the SEC’s arguments through a 93-page document. They are focusing on proving that XRP is not a financial asset that guarantees any rights to investors. They explain that it is a virtual currency whose usefulness goes beyond its value in the financial market.
Ripple also mentioned that it reached an agreement with the US Department of Justice and the Financial Crimes Enforcement Network (FinCEN) in 2015. In that arrangement, they registered XRP as a convertible virtual currency, which allowed conducting transactions in secondary markets.
“The functionality and liquidity of XRP are totally incompatible with regulations on securities. Therefore, requiring registering XRP as a security is detrimental to its main usefulness. The lawsuit mischaracterizes the advice that Ripple received in 2012. A reasonable reader would have concluded that Ripple Credits (XRP’s former name) were not actually a security,” according to the aforementioned document.
Ripple is indeed responding to the SEC’s lawsuit, but it is more likely to succeed than Telegram at its time. This conflict seems to show that US regulations need improvement to meet the needs of the growing cryptocurrency market.
XRP’s Price in the Wake of the Wall Street Bets Effect
The Wall Street Bets effect has recently contributed to the benefit of Ripple, which led XRP to rise to USD 0.4926, achieving a profit of 52.86%. After that, there was a rapid correction of the price of XRP as a result of profit-taking. However, excitement seems to continue, and there are no obvious signs of exhaustion.
Although the pumping of XRP’s price seems somewhat artificial, the money is there to stay until further notice. People only need to observe the behavior of the price to become aware of what could happen next.
By Alexander Salazar
