Ripple is in trouble again, and the encryption aristocrats "confront" the SEC
Editor's Note: This article comes fromBlocklike（ID：iblocklike）, reprinted by Odaily with authorization.
Editor's Note: This article comes from
, reprinted by Odaily with authorization.This is an ongoing debate.On Monday, Ripple received a notification letter from the SEC. Ripple officially announced that the U.S. Securities and Exchange Commission (SEC) plans to sue Ripple and accuse it of selling XRP in violation of investor protection laws. This morning, the SEC officially announced that it has filed a lawsuit against Ripple, CEO Brad Garlinghouse and co-founder Chris Larsen, accusing it of conducting a $1.3 billion unregistered securities sale.The dispute over Ripple's securities qualification has been going on for a long time, and the SEC has also made frequent moves recently.
Blocklike noticed that, on the one hand, multiple large-scale ICO offerings that have not yet been registered with the SEC are considered to be facing regulatory risks. On the other hand, since 2019, some of the compliant issuers approved by the US SEC are also trying to redefine through new project progress.
Bringing up Ripple's "legacy issues" again, the chain reaction of the encryption communityXRP has always been regarded as an iconic currency of how digital currencies are characterized.After several years of development, Ripple's customers have covered at least 350 financial institutions in more than 40 countries. These mature business cooperation is regarded as one of the important value supports of XRP. Ripple's RippleNet cross-border payment solution mainly includes the basic solution xCurrent provided by Ripple for financial institutions, which is used for real-time two-way settlement between different bank ledgers.To put it simply, one financial institution only needs to convert the local legal currency into XRP, and then the other financial institution converts the received XRP into the country's legal currency to pay the payee. In this way, XRP can be used to reduce the liquidity cost of funds.This function is described by analysts as a "stable currency for transfer". If you do not consider the more elements that "cryptocurrency" incorporates into XRP, in terms of the role of tokens alone, XRP is usually regarded as a relatively standard one. "Utility tokens" (also known as utility tokens). Under the U.S. digital currency regulatory framework, this type of token is completely different from the "security token" that needs to be registered with the SEC.It is not difficult to understand the more mainstream views in overseas communities: "If XRP is also classified as a security, then most digital currencies will definitely be classified as securities."This lawsuit is not the first that Ripple has encountered, nor is Ripple's first lawsuit directly filed by the SEC. According to incomplete statistics, as early as 2018, Ripple Labs encountered three collective lawsuits filed by investors. In 2019, there are still 2 class action lawsuits filed by investors against Ripple. Even, the California courts in the United States have combined the two lawsuits facing Ripple to avoid repeated trials of the same defendant. These lawsuits revolve around "token attributes", "whether the government has manipulated the market", "severe centralization" and so on.The difference is that the focus of the debate has not changed, but the source of the lawsuit has become the SEC.SEC officials believe that Ripple violated federal securities laws when it sold XRP. The lawsuit mentions that starting in 2013, Ripple continued to sell XRP to retail investors around the world to raise funds. Ripple also distributed billions of XRP in exchange for non-cash considerations such as labor and market-making services. In addition to organizing and promoting XRP sales used to fund the company's business, Larsen and Garlinghouse also effected unregistered personal sales of XRP totaling approximately $600 million.After more than two years of volatile currency prices, XRP has recently shown impressive performance in the market. According to coinmarketcap, since the beginning of this year, Ripple has risen by about 150%, and its market value has exceeded 20 billion US dollars, ranking third for a long time. As of press time, its market value ranking has slipped to fourth place.At this moment in time, the "point of conflict" in this controversy seems to have been magnified. Against the background of a more complex market, many industry organizations in the overseas encryption community have expressed their latest views, and many organizations have "stand in line".Ripple CEO Brad Garlinghouse insisted on Ripple's consistent proposition. He said: "The SEC is completely wrong in terms of facts and laws. XRP is a currency and not a security. XRP is the third largest virtual currency, which is the same as Bitcoin and Ethereum identified by the SEC. Likewise, it is not an investment contract. Additionally, key departments of the U.S. government, including the Department of Justice and the Financial Crimes Enforcement Network (FinCEN), have determined that XRP is currency, and therefore, XRP transactions are outside the scope of federal securities laws.”Blockstream Chief Strategy Officer Samson Mow commented that Ripple and XRP do not have any innovations, thus denying Ripple's statement that "the SEC initiated a lawsuit against it because the US government and regulatory agencies cannot accept innovation."In a live broadcast at the end of November, Ripple CEO Brad Garlinghouse has already made another assumption: "Although it is difficult to treat XRP as a security, if XRP is characterized as a security in the United States, we have other G20 markets. Views are different for XRP. Over 90% of RippleNet's customers are outside the US.In this regard, Blocklike interviewed Adi Sideman, the founder of Props, an American compliance issuer. His opinion is: "The SEC's impact on Ripple's lawsuit is negative, and it is not helpful to the development of the industry. Ripple is a financial industry with integration and A mature project for use cases, the SEC's action will hurt the confidence of businesses that would consider enforcing XRP or other crypto technologies. It will slow down real-world integration and new use cases, which in turn will slow down the adoption of crypto in the US. I expect Ripple to settle with the SEC and continue to operate. But the SEC has also made its point and will prevent new projects from following in the footsteps of XRP (i.e. operating without an SEC waiver).”
Belcher,Some "encryptionists" seek "secondary characterization"Gabriel Shapiro, a lawyer at the law firm Smolen & Van Loo LLP, publicly believes that the listing of Coinbase may enable the SEC to decide which tokens the exchange can list. He analyzed that the current SEC still does not have a clear rule, and the SEC should give priority to confirming the rules of "whether it constitutes a security" rather than specifying which tokens are securities. In the current situation, the SEC may even do this: if a certain token has not been filed with the SEC, the exchange cannot list these tokens.Interestingly, some quasi-"digital securities" that have been approved by the SEC are also seeking ways to be redefined. Blockstack, which is the first in the United States to issue digital securities in compliance with the terms of "Reg A+", is one of such cases.
(Media reports on Blockstack at the time)In July 2019, the decentralized computing network Blockstack became the first compliant project to receive SEC Reg A+ approval. On October 25 of the same year, Blockstack (STX) launched the leading digital currency exchange Binance; at the end of July 2020, Coinbase issued an announcement saying that STX was also included among the 18 tokens being evaluated for listing.Blockstack (STX) co-founder and CEO Muneeb Ali once told Reuters that Blockstack will officially launch the main network in January 2021: "Since the launch of Stacks 2.0, its network will no longer be controlled by any single entity. Therefore, according to SEC regulations, its Stacks tokens will no longer be considered securities. This means that Blockstack does not need to submit regular financial reports as a company entity, and its Stacks tokens can be traded on the US digital asset exchange.”Adi Sideman, who has been in the US market for a long time, also discussed this approach. According to his point of view, in the United States, blockchain entrepreneurs need to frame encrypted assets as functional tokens or security tokens, either one or the other.“The language used is very clear, the positioning is either Security or Utility, but rarely a mix. However, the government sees more gray areas and new challenges in it, as we have in the case of Ripple and Kin As you can see."According to Adi Sideman's further introduction, this situation generally appears in this environment: "As a result, most projects in the United States are self-regulated-carefully make their own technical and legal arguments. We Props chose a unique The method is to characterize our Token as Security and securities attributes in the United States, but as Utility and practical attributes outside the United States. Props overall performance is practical, but the exemption of SEC RegA+ makes Props under the legal framework of the United States Allowed to integrate with established businesses in the US and applications with millions of users.”
