On the 13th of July, the courts ruled that Ripple Labs Inc did not violate securities laws when it sold its token (XRP) on public exchanges.
According to the judge, institutional investors would be aware that the token would be a security when it was sold by Ripple. This is because the token shares many characteristics with regular securities.
However, the court doesn’t consider the token a security when it is purchased by programmatic investors. Following the SEC ruling, the price of XRP would shoot up, making the altcoin the fourth largest by market cap. It would later fall back to the fifth position, after BNB.
But what does this mean for the greater cryptosphere?
The Power of XRP
Ripple Labs is confident that the ruling will encourage financial institutions to adopt the token for international transfers. Many companies had abandoned the altcoin because of the uncertainty surrounding the SEC case. If the court had ruled that the token was a security, many exchanges would be in trouble for listing unregistered securities.
It is worth noting that XRP enables money movements in a matter of seconds. It acts as a bridge when transferring funds from one fiat currency to another. This makes it essential in international finance.
First, it is worth noting that the decision seems to have been based on the public’s understanding of the crypto sector three years ago. The space has experienced a lot of changes over the years, and the ruling may not necessarily be extrapolated for all other cryptocurrencies.
However, it is a first step to establishing a comprehensive and clear regulatory framework for Bitcoin and other altcoins.
Exchanges to Benefit?
A noticeable result of this ruling is that many players in the US crypto sector are hopeful that the government will allow a better environment for cryptocurrencies to flourish. Lots of exchanges have already re-listed XRP. These include Kraken, Bitstamp, and Coinbase. Gemini is currently considering adding spot and derivative trading options for XRP.
The positive sentiment can also be seen in the stock price of Coinbase, which rose considerably after the ruling. Most people feel like the precedent set by the XRP ruling will help with the ongoing Coinbase court case.
According to US laws, crypto sales can only be regulated if the sales consist of securities. Since the court ruled that cryptocurrencies sold on exchanges aren’t securities, the SEC will likely take a more hands-off approach when dealing with the crypto sector.
Not the Final Say
Crypto enthusiasts are right to celebrate the ruling as a win for crypto. However, it is worth pointing out that the ruling isn’t set in stone. The SEC can still appeal the decision passed on Thursday, and the court has stated that it did not address the legal classification of secondary XRP sales. That means secondary sales on exchanges may eventually be classified as securities.
The US Congress is still developing legislation around the crypto sector. Fortunately, bi-partisan support exists for crypto, particularly Bitcoin. With so many allies of crypto in Congress, there is a good chance that any legislation passed will be fair and reasonable.
A good proportion of Democrats and Republicans believe that crypto is the future of finance, and an overwhelming majority believe that there should be clearer laws surrounding the sector.
The Thursday ruling was a win for Ripple Labs and the crypto sector in general. Now that sales to programmatic investors aren’t considered securities, the SEC will be less likely to interfere in retail trades. Many US exchanges have already re-listed XRP. However, you should remember that the SEC can still appeal this ruling.
It is expected that Congress will soon pass unambiguous legislation surrounding crypto. Given the general sentiment among lawmakers, the laws are likely to be fair and reasonable.