TL; DR breakdown
- SEC is suing Ripple over security.
- Ripple is very different from Bitcoin and Ethereum.
- XRP has never had a strong coin identity.
XRP’s lack of identity led to a Ripple lawsuit
Ripple (XRP) was doing so well and showing so much potential that it could only crash and burn under the thumb of the Securities and Exchange Commission (SEC). The SEC announced Tuesday that it was filing a Ripple lawsuit against its chairman and CEO for the sale of $ 1.3 billion worth of XRP securities.
It’s a marketing problem. The company is crucified because it does not define the reality of its coin identity.
The SEC believes the organization has lied to retail customers about the nature of XRP. The Ripple lawsuit comes because Chairman Christian Larsen and CEO Bradley Garlinghouse have raised capital for Ripple through XRP sales.
Ripple did not properly register the sales, which means the company has violated SEC guidelines.
XRP a security or a currency?
The Ripple lawsuit has to do with whether XRP is a security or a currency. If ripple were viewed as a currency, there would be no problem in the eyes of the SEC. Mr. Garlinghouse argues that it is a digital currency.
The SEC believes that XRP provides security for their organization. The confusion between the SEC’s idea of what XRP is and what Ripple believes creates a rift between the two organizations.
The SEC believes that Ripple has not provided those investing in it with the proper knowledge to prepare for potential risks. Other cryptocurrencies like Bitcoin and Ethereum don’t have the same problems as XRP because they are currencies in the eyes of the SEC.
Ethereum and Bitcoin will both be mined, while XRP started with 100 billion coins ready to use. Ripple holds roughly six billion XRP, and Mr. Larsen and Mr. Garlinghouse own a lot of XRP. 48 billion XRP will be set aside for sale.
From a distance, XRP looks more like a security.
XRP identity problem
XRP’s identity problem dates back to when the coin was first launched. In 2013, a prominent Ripple investor spoke about how he didn’t believe Ripple would be established as a coin.
In an interview with Tech Crunch, Kevin Rose denounced that Ripple was a currency and instead advertised it as a wire transfer. Mr. Rose instead advertised the company as an exchange that had a good relationship with the banking system with Google when he was the head of venture capital at Google.
Ripple’s exchange identity
Ripple has never established itself as a coin, but has grown in importance as a company.
It’s no surprise that the SEC views XRP as collateral tied to their company’s success, given that Ripple is primarily known as an exchange. The company is pushing for closer ties with banks, unlike many cryptocoins like Ethereum and Bitcoin, which are viewed as currencies.
Most cryptocurrencies don’t want to spend their energy building closer relationships with banks because they are trying to dethrone them. Ripple stands out for the wrong reasons.
The SEC recognizes Ripple’s lack of identity like everyone else.