- Ripple has been on the radar of the Securities and Exchange Commission for some time with allegations of conducting a $1.3 billion unregistered security offering being levied against them.
- Pressure continues to mount as the Securities and Exchange Commission seeks to extend its investigation by two months in order to confront new issues.
- RippleLabs has announced that Ripple intends to go public immediately following the dispute with the SEC.
- The company faces problems with no clear end to the legal battle in sight. Many are now suggesting that the actions of the SEC are a market wide concern.
The Securities and Exchange Commission is the governing body that regulates and controls the stock and capital market. Its reach extends from registration and listing, to the investigation of fraudulent activities in securities. The mass adoption of cryptocurrencies and blockchain solutions has caught the attention of the Commission.
Like the stock market, the cryptoverse isn’t immune to scams and fraudulent ICOs. Initial Coin Offerings (ICOs), boomed in 2017 and 2018, with many crypto and blockchain solutions utilizing it to raise funds for their projects. Unlike IPOs in the stock market, there are few regulations surrounding ICOs, and many have gone south as a result. Ripple, among other companies, are being investigated on the technicalities of their ICO.
The SEC Clamps Down on Ripple
XRP was launched by RippleLabs to be a faster, more secure, and scalable solution to existing payment platforms and digital assets, gaining popularity due to its technology and processing speed. At the time of writing XRP is trading at $1.03.
In December 2020, the SEC announced that it had filed charges against Ripple and two executives: co-founder, former CEO and executive chairman of the board, Christian Larsen, and current CEO, Bradley Garlinghouse, who allegedly raised $1.3 billion through the sale of unregistered securities.
The sale of XRP via an unregistered company violated the registration process of the Securities Act.
Ripple has recorded several successes in its legal battle so far, but the case appears to be far from finished, with the SEC seeking a 60-day discovery extension.
The SEC has already been conducting witness interviews and are now aiming to interview a further 6 witnesses. The Commission is of the view that a two-month extension is a fair allocation to properly address the newly raised issues.
On the Flipside
- Gary Gensler, the new chief of the SEC, is a crypto enthusiast and experts expect that the case will soon be settled.
- The Securities and Exchange Commission isn’t doing much to prevent, or stop, crypto scams and remains too focused on Ripple.
The Impact on Ripple and Other Assets
With no clear settlement in sight, the investigation into Ripple has affected the price of the asset. While, at the time of writing, XRP is trading at $1.03, the price could have flown higher, to as much as $1.8 or more, assuming a resolution was made. The company has announced that it plans to go public once its dispute with the financial regulator concludes. Ripple’s CEO, Bradley Garlinghouse, revealed that all plans to go public are on hold until the tussle with the SEC has been resolved.
The news of a future Ripple IPO pushed XRP up over 14% in 24 hours. Going public is expected to be huge for Ripple in many ways, with funds likely being pumped into the asset. The SEC’s case prevents Ripple from enacting its plan, and is hindering the company’s growth.
Coins and assets in the cryptoverse will be greatly affected by the SEC if it continues to dig into ICOs. ICOs are a method of raising money for crypto solutions and the SEC acts as an obstruction to such activity.