Ripple vs SEC: XRP is not a security – crypto prices are exploding

Bitcoin is up 2.7 percent in the last 24 hours, Ethereum 7.6 percent, XRP — the second-largest cryptocurrency by market capitalization years ago — even up 64 percent (as of 9:45 a.m. Friday). What happened?

In 2020, the US Securities and Exchange Commission (SEC) sued Ripple Labs. The accusation: The developer company had raised $1.3 billion from the sale of an unregistered security called a “Security”. The security in question is the cryptocurrency XRP.

Central to the process was the question of whether XRP is actually a security. According to court documents, Judge Analisa Torres (of New York’s now world-famous Southern District) has now ruled: The XRP token is – in most cases – not a security. With that, the charge collapses. But not only that.

Many observers see this judgment as a precedent that can be applied to other cryptocurrencies. Much to the chagrin of SEC Chief Gary Gensler. In February, Gensler explained in a highly acclaimed interview with “New York Magazine” that all cryptocurrencies are “securities” – with the exception of Bitcoin.

Gensler’s statement caused an uproar, especially among Ethereum supporters. Because the unloved SEC chairman’s word carries weight. For years there has been uncertainty whether cryptocurrencies are securities or fall into the category of commodities such as coffee or gold (commodities in the American sense). While commodities are freely tradable, securities are subject to strict SEC regulatory requirements. This also includes a required license. None of the major crypto projects have it.

In recent weeks, the SEC has attempted to clear the fog of regulatory ambiguity by attempting to usurp the authority to interpret this finding process in the person of Gary Gensler. She sued both the largest (Binance) and the second largest (Coinbase) crypto exchange. Coinbase has been accused of trading unregistered securities. In at least 13 cases. The cryptocurrencies Solana, Cardano and Polygon were explicitly mentioned – all industry heavyweights. The publication of the court ruling yesterday also caused the prices of these tokens to skyrocket.

The core of the security asset issue is the decentralization of a project. With Bitcoin, this is certainly the case because there is no centrally organized institutional force behind it. The company, organization or association «Bitcoin» does not exist. That is why the mother of all cryptocurrencies is declared almost undisputed as a commodity.

But Ethereum is already being discussed. The number two in cryptospace has its own foundation. The Ethereum Foundation is based in Zug and directs the development of the project from there. According to a strict interpretation, this is already an indication of insufficient decentralization and security. But most of Ethereum is also seen as a commodity, apart from die-hard Bitcoin maximalists.

The case of XRP seemed clearer. Ripple has long been considered a prime example of a centralized project. That’s why it was targeted by the SEC, who wanted to set an example – and now promptly stumbled.

However, the SEC was not defeated across the board. According to the verdict, XRP is not a security for free trading on crypto exchanges. It is different when the token is offered to institutional buyers. Then it is actually a matter of safety.

In the crypto sector, the publication of the court ruling caused euphoria among the majority. It remains to be seen how the SEC will respond to this.