RIPPLE has hit back at speculation that the XRP token could be classified as a security in the US following fears that the decision could spur a “big dip in its market value.”
Following a number of reports on XRP’s classification by the Securities and Exchange Commission, a spokesman from Ripple, an associated but entirely separate entity to the XRP token, told Express.co.uk: “Everyone is free to say what they want or pursue their own agenda in the media, but ultimately the facts around XRP will win out over uninformed speculation.”
He said: “XRP doesn’t give its owners shares in Ripple, the XRP Ledger is decentralised among 150 plus independent validators – Ripple operates only 14 of them – and XRP would continue to exist even if Ripple disappeared tomorrow.
“Based on these facts – and many more – we continue to believe XRP should not be classified as a security.”
The XRP token is the hot topic at the centre of a debate in the US over whether securities laws apply to cryptocurrencies.
Bitcoin and ethereum, the largest cryptocurrencies by market capitalisation, are generally not considered securities, however the XRP token, described by Ripple as an “independent digital asset” has been embroiled in the paranoia because Ripple – a technology company – still owns over 60 billion of the 100 billion XRP tokens ever created.
In short securities are ownership shares that need to be registered. An ongoing lawsuit in the US claims that XRP was “created it out of thin air” as part of a “never-ending initial coin offering” used to “raise “hundreds of millions of dollars”.
Ripple has repeatedly hit back at the claims, chief market strategist, Cory Johnson, told CNBC in April: “We absolutely are not a security. We don’t meet the standards for what a security is based on the history of court law.”
However, despite the denial, Samuel Leach, CEO and Founder of Yield Coin told Express.co.uk that Ripple is “going through some major issues” with the SEC declaring that XRP would be a security token.
He said: “For now most cryptocurrencies to be listed on US exchanges have to pass the Howey test, to determine whether an asset is a security or not whether an investment is made with the profits to come solely from the efforts of others.
“The major issue with this is that security tokens are legislated by the SEC, which has the ultimate authority to determine whether the US investors can invest in the financial instrument in question, as well as whether these need to be accredited investors.”
However, Mr Leach says that this is an “all but fair” system given that to become an accredited investor, one must have a net worth of $1m, or have an income of at least $200k per annum.
He adds that this just enables “the rich to get richer, by providing potential lucrative investment opportunities not available to the broader public”, and warns that this causes issues as it “limits the potential reach of investors.”
On XRP’s hope for 2018 he adds: “I cannot see it going any higher than the $1 mark by the end of year.”
Yesterday, Christophe de Courson, Olymp Capital CEO told Express.co.uk that a price slump is likely depending on XRP’s classification.
He said: “If the SEC states XRP is a security, the coin will definitely take a big hit because it is listed on all the major exchanges – except Coinbase – and moreover, I would expect a strong negative reaction of the global crypto-market for such news.”
Anatoly Castella, CEO, Elpis Investments told Express.co.uk last week that Ripple’s associated XRP token is set to miss out because it is not a “Digital Fiat”, and not a “real” cryptocurrency.
Mr Castella warns that XRP falls short of the “purest interpretation of ‘cryptocurrency’.”
He said: “Ripple resembles a fintech platform combining the best elements of fiat money and blockchain cryptocurrency.
“If the SEC categorises Ripple as a security, we will experience in the short term a big dip in its market value. In the long term it will simply become a digital asset owned by institutional investors.”