Ripple, which is responsible for the creation of the payment system and the XRP token, has filed a response to a billion dollar lawsuit from the US Securities and Exchange Commission (SEC).
Ripple asks the court to consider the position of the regulator in relation to Bitcoin and Ethereum, as well as compare its attitude to the main cryptocurrencies and XRP. Thus, company representatives can create problems for BTC and ETH in an attempt to protect themselves.
To begin with, let’s recall that the relationship between the US Securities and Exchange Commission and Ripple has long been very strained. At the end of December, the regulator recognized XRP as a security and filed a corresponding lawsuit, due to which many trading platforms had to suspend trading in cryptocurrency and refuse to interact with it.
That is, the essence of the claims is that representatives of the regulator consider XRP to be a security, which means that Ripple had no right to sell it to investors without special approval from the SEC. The company representatives did not receive it, which means the whole story with the cryptocurrency is in fact illegal. This is especially true given the fact that the founders of the project received huge portions of tokens and made a fortune on their sale.
For clarity, here is a graph from The Block, which shows the XRP sales volume directly by Ripple. Overall, quarterly results are equivalent to tens of millions of dollars.
However, Ripple employees do not plan to put up with what is happening. Now they want to get an answer to their question from representatives of the Securities and Exchange Commission. If the SEC does not consider Bitcoin and Ethereum as securities, then why does XRP fall into that category?
What’s going on with Ripple XRP?
The day before, in a 93-page response filed with a Manhattan court, Ripple meticulously reacted to each of the Commission’s allegations. Thus, they determined what would be her defense if the claim was brought to court.
As part of its defense strategy, Ripple claims the SEC was unable to substantiate its claim against the company. In addition, according to its representatives, XRP is not a security or “investment contract” under US federal law. Consequently, the digital asset allegedly does not fall under the restrictions of the laws, which means that the accusations should be considered unfounded, Decrypt reports.
It is noteworthy that due to the excessive centralization in Ripple, the XRP token is considered by many crypto enthusiasts to be a scam.
Notably, Ripple also claims in its defense “lack of due process and fair notification.” This explains that the SEC could and should have brought similar charges in 2015, when Ripple settled a similar lawsuit with another regulator called FinCEN. XRP was then recognized as a “convertible virtual currency”, according to the firm.
That is, Ripple is confident that XRP should be viewed as a virtual currency in the same way that the SEC obviously considers Bitcoin and Ethereum. Ripple officials quoted statements made by former head of corporate finance at the SEC, William Hinman, in June 2018. He once stated that he and presumably the SEC as an organization as a whole did not consider Bitcoin and Ethereum as securities. And this is despite the fact that Ethereum was launched through the ICO procedure, which means that the fact of the spread of ETH can already be linked here as an “illegal sale of securities.”
We do not entirely agree with this statement. And while Ethereum did launch on a pre-fundraising model, the developers were selling ETH for bitcoins. In particular, on the day of the launch of the sale of coins on July 22, 2014, 2000 ETH was offered for one bitcoin. Two weeks later, the cost of ETH rose to 1,337 Ethers per bitcoin. As a result, the authors of the project collected about 31 thousand BTC, which at that time was equivalent to $ 18.3 million. This is the main difference between Ethereum: cryptocurrency was sold for another cryptocurrency.
In addition, Bitcoin and Ethereum are decentralized projects, that is, any users can connect to the operation of cryptocurrency networks. At the same time, XRP is controlled by Ripple, which significantly distinguishes this project from the two industry leaders.
Ripple also filed a Freedom of Information Act request for clarification on how Director Hinman and the SEC came to their conclusions as to how blockchain-based assets can transform from securities to non-securities as their own network evolves.
In the meantime, the XRP price has risen significantly over the past few days – the cryptocurrency is showing a yield of 133 percent in just the last week. Today the coin is worth 65 cents.
Compound Finance spokesman Jake Cherwinski noted that Ripple initially filed the SEC case against the company as “an attack on an entire niche of cryptocurrencies.” However, now its employees are trying to shield themselves, in fact, threatening the key projects of the industry.
We believe that this attitude of Ripple employees goes against professional ethics, which should also be present in the cryptocurrency industry. In fact, the company’s representatives decided to create a risk for Bitcoin and Ethereum for the sake of a possible rescue from the Securities and Exchange Commission. At the same time, the chances of changing the SEC’s point of view – especially given the previous cases – are practically nil.
Therefore, in general, this approach seems ugly. Obviously, the company’s reputation after such actions is unlikely to improve in the eyes of blockchain fans.