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XRP too big to fail by SEC security rules

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XRP may lose out on being classified as a security. Deputy counsel at the crowdfunding platform Republic, Max Rich feels the SEC may not succeed in forcing Ripple Labs (creator of XRP) to reimburse investors. He feels the SEC would crack down on ICO projects that may have sold unregistered securities.


However, the XRP token sale could be exempted because it took place long beforehand (in mid-2013). Rich said that the SEC will make use of the DAO as the inflection point. Projects that hosted a public sale after the specified date will be treated in a different manner from those that hosted before the date. In an email exchange, Rich said that he doesn't think the SEC uses the DAO as an inflection point.

Rich also feel that public sales that took place earlier I.e. Ripple, will still feel the SEC's wrath; just that for now, the SEC is less focused on them. He wrote:


It’s likely they are using limited resources to address offerings where there are i) principals that can be identified, ii) funds can be traced and clawed back and iii) benefits that can be gotten for the public – an enforcement net benefit.


Meanwhile, BX3 Capital's tax attorney and partner, Michael Minihan noted that XRP, just like Ether is very much integrated with the cryptocurrency sector. Minihan stressing Rich's idea that the token has been in existence for a long time, expressed his view that, it would be difficult to touch its size and influence within crypto. In an interview with Crypto Briefing, he said:


The thing with XRP is it’s almost like a too big to fail, too far along. Basically, if you torpedo Ether, you’re going to tank the whole thing. You have the ability to tank most of the market by doing that. I think that’s not what they want to do. I think all they’re trying to do is protect investors, and by calling Ether a security, doesn’t protect investors.


XRP and Ripple Labs

Even though the SEC is yet to bring up some charges against Ripple, we have seen some buyers file complaints that hints that the company assured them of receiving financial returns. On many occasions, Ripple stressed that XRP is an "independent digital asset" having clear-cut use cases. This means that Ripple doesn’t see XRP as an investment, but as a utility token. After all XRP token is the second largest by market cap.


The Security debate of XRP

The SEC has remained silent on XRP despite public comments made by one of its directors that ether was not a security. From the market perspective, we can at least say the token has been one of the successful ones, despite the fact that it has some regulatory uncertainty surrounding it. More investors were definitely attracted when it moved into second spot, ahead of Ether.

Ripple has made efforts to keep a distance from XRP, but in mid-September, it made a U-turn. The shift reveals that Ripple is not bothered about the SEC naming XRP as a security. The major concern here may not be the debate on if XRP is a security. Financial restrictions may simply indicate that the SEC is focused on violations that happened recently, rather than those of five years ago. Banks' major concern is whether XRP truly provides them real utility. If this is not the case, that could result in some problems.

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