In this photo, the illustration of the cryptocurrency “altcoin” is arranged for a photo on April 25, 2018 in London, England.
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Ripple, the best-known fintech company for XRP cryptocurrencies, said it expects to be sued by the Securities and Exchange Commission over allegations that it violated investor protection laws.
The SEC is set to file a lawsuit against Ripple, CEO Brad Garlinghouse and co-founder Chris Larsen. He will claim that the company violated the laws against the sale of unregistered securities when it sold XRP to investors.
Garlinghouse said he expects the lawsuit to be filed before Christmas. In a statement Monday, he said the SEC trial was “fundamentally wrong in law and in fact” and questioned its timetable.
“XRP is a currency and should not be registered as an investment contract,” Garlinghouse said. “In fact, the Department of Justice and the Treasury’s FinCEN have already established that XRP is a virtual currency in 2015, and other G20 regulators have done the same. No other country has classified XRP as collateral.”
“The SEC has allowed XRP to operate as a currency for over eight years and we question the motivation for taking this action just a few days before the change of administration. Instead of providing a clear regulatory framework for crypto in the US, (SEC President) Jay Clayton inexplicably decided to sue Ripple – leaving the actual legal work to the next Administration. “
Clayton said last month that he would resign as president of the SEC at the end of the year, before his June term expires.
The SEC was not immediately available for comment.
Why does the process matter?
With a market capacity of over $ 20 billion, XRP is one of the most valuable cryptocurrencies in the world. It was created and distributed by the founders of Ripple in 2012 and is designed to facilitate fast cross-border payments.
According to Ripple, the SEC intends to claim that XRP is a guarantee and that Ripple violated US law by not registering the symbol with the SEC before listing it.
The agency has won other lawsuits against Block.one and Kik start-ups, which it says violated securities laws by raising money through a controversial fundraising method known as the initial bid. coins.
Ripple argues that XRP – like bitcoin – should be classified as a currency and should not be registered as an investment contract. The company has recently been valued at $ 10 billion and is backed by Japanese financial services giant SBI Holdings, Spanish bank Santander and top venture capital firms, including Andreessen Horowitz, Lightspeed and Peter Thiel’s Founders Fund.
The “security” label matters, as it could bring XRP under new strict rules and have a strong impact on Ripple. Although it claims to be independent of cryptocurrency, Ripple owns 55 billion of the total of 100 billion existing XRP chips. The company even generates income from the sale of XRP shares each quarter.
Ripple has threatened to move its headquarters outside the United States to the issue, with London, Switzerland, Singapore, Japan and the United Arab Emirates as potential locations.
XRP fell sharply following news of the SEC’s cost. The cryptocurrency fell almost 18% on Tuesday to trade at around 46 cents.
Like many other digital currencies, XRP has grown in value this year as investors and major companies have warmed up to cryptocurrencies such as bitcoin. XRP is still up about 144% so far.
Bitcoin, which hit a record high of $ 23,000 last week, sank nearly 5% on Tuesday to about $ 22,748. Ether, the second largest cryptocurrency by market capitalization, fell more than 5% to $ 607.
The fresh review of Ripple comes days after the Treasury Department proposed a new bitcoin disclosure rule aimed at closing regulatory loopholes over money laundering. The rule would require cryptographic forces to take additional compliance measures when sending funds to so-called unhosted wallets that are not held on a stock exchange or by a bank. The treasury gave the public only 15 days to comment on the plan.
It comes after another major space company, Coinbase, submitted an initial public offering. Coinbase criticized the US proposals for certain cryptocurrency transactions, calling them an “unfortunate and disappointing departure” from previous moves and discussed the limited time allowed for a public response.