Ripple’s Take an Coinbase Decision Reveals Broader Controversy

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Today, tech reporters are continuing to focus on the decision of the Coinbase exchange to list XRP, a token commonly associated with Ripple Labs. But then it gets weird.

Denying that Ripple had offered Coinbase any incentives to list XRP, Ripple leaders also appear to be denying that XRP actually belongs to Ripple in any meaningful or significant way – take a look at this current Cointelegraph coverage for details.

This is a strange about-face, and one that experts are really looking at closely because it affects XRP’s status in the world of U.S. regulations.




Why would Ripple NOT want to tout its ownership of XRP? Well, it has something to do with an ownership stake that’s under scrutiny, and also with how the U.S. Securities and Exchange Commission works.

In an extensive posting from September of last year, Preston Byrne goes over many of the arguments made by Ripple about why Ripple shouldn’t be considered the “owner” or even, apparently, the founder of XRP, and by extension, why XRP should not be considered a security under U.S. securities law.

“Why Ripple Labs has elected to push this line of reasoning, I cannot say,” Byrnes wrote in a cogent analysis of the effects of Ripple washing its hands of the XRP token/coin. “If I had to venture a guess, I should think that running a company that does not manage or issue a cryptocurrency is far less of a pain in the ass than running one that does. Bolting on a token to one’s commercial offering means introducing into one’s life a panoply of the worst and best elements of the crypto world: community management, troll bot armies on Twitter, Telegram groups, Subreddits, … It also promises the possibility of undertaking some of cryptoland’s most sublime pleasures, including sending some love letters to any or all of the Securities and Exchange Commission, FinCEN and the Commodity Futures Trading Commission.”

Voicing concerns about categorizing XRP as an independent digital asset, Byrne suggests that Ripple used to be proud of XRP’s origins.

“I was there in 2013;” Byrne wrote. “I remember the days when Ripple owned the fact that it had built the Ripple… excuse me, XRP… protocol.”

Traders and investors in any cryptocurrency should know that the U.S. SEC and other agencies are currently going through some soul-searching looking at which cryptocurrencies can be labeled as securities. They use criteria like:

  • Decentralization
  • Ownership stake
  • Token or coin history

Many other factors also apply. In general, regulators hold that cryptocurrencies like Bitcoin and Ethereum are not securities because they are not directly tied to a particular brand or ownership entity. However, many of the altcoins that have emerged such as J.P. Morgan’s JPM coin would likely be regulated as securities, and as for Ripple … it’s kind of hanging in the balance.

Keep an eye on Ripple’s attempts to classify itself in ways advantageous to holders and how the U.S. SEC responds as U.S. regulators continue to grapple with the ambiguities inherent in cryptocurrency systems.

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