Everything You Need to Know About Ripple and the Recent SEC Lawsuit

by Nicholas Pangiet     1月 29, 2021

8 読んだ分

With the market value that can increase by more than 400%, traders and brokers often look at cryptocurrency as a wise investment.

Investors believe that cryptocurrency's stock is fragile right now, as cryptocurrencies such as bitcoin along with several technology companies are in a market bubble.

Due to the fast nature of shifts in the market, it is essential to stay updated on cryptocurrency in the news. One of the largest cases that have been gaining media attention is the SEC case against Ripple Labs. Those interested in beginning trading need to be informed about Ripple XRP and how this SEC suite may affect the market.

Cryptocurrencies are a globally recognized digital asset that works as a type of currency. The use of cryptocurrency cuts out the use of currency conversions when trading occurs on a larger scale.

Competitive Market of Cryptocurrency

There are thousands of different variations of cryptocurrency now. In 2009, Satoshi Nakamoto first launched Bitcoin, the first and most widely recognized use of digital currency. Although there is a broad range of different digital currency types, the market in online training recognizes a few as optimal investment opportunities.

Although investors often stock up on bitcoin shares for showcasing their value, some forms of cryptocurrency are predominately used as a resource for money exchange.

A Russian Canadian programmer launched Ethereum to create smart contracts. The goal of Ethereum was to combine cryptocurrency and conventional finance. It has been very successful since its introduction to the market as shared have grown in value of more than 500%.

XRP was a currency created by Ripple Inc. this Company was introduced to the market in 2012. the primary use for Ripple is to ease international bank transfers.

Another American crypto company is Tether. Tether USD claims it is supported by the reserves American dollars and tries to tether the value to you in US dollar on a one for one scale. Tether also operates internationally big thing is the value of different international currencies.

What is Ripple XRP?

The Ripple network was designed to be a currency exchange settlement system. By providing the lowest processing time and fees on the market, it can be widely used by banks and money exchange companies.

This has become a widely used and recognized form of cryptocurrency due to its high transaction capabilities and speed. XRP takes 4 seconds to transfer and is built with the capabilities of handling 15,000 transactions per second.

Ripple operates on a network with thousands of rippled nodes or validators who work to find consensus to validate each transfer. They operate independently from RippleNet. There is a necessary 80% from global validators, and there is a system built to help ensure trust and valid transactions online.

Ripple is an open-source program designed to solve a payments problem. Ripple is a non-minable form of currency which means that the coins are already in circulation and users need to be introduced to the market.

Two Payment Types

On the RippleNet you can pay individuals with either XRP or an IOU.

An IOU is not a formal payment, and it is a published debt to someone else created through the trust line. Unlike most cryptocurrency forms, this form of trading relies on trust in the system and other shareholders you are dealing with.

When paying someone in an IOU, you are putting a promise in their wallet, rather than the asset itself. For example, if Smith owes Sally 100USD, the IOU Sally would receive from Smith would be 100USD. Smith, this code shows the value promised and the promiser.

Although an IOU is a tradable asset, it doesn't have any real value until replaced with the asset promised.

IOUs are often used in banking systems between different currencies and depend upon the RippleNet validators to help build that trust between entities on the network.

How Ripple XRP Works

Money transfers from even establish banking systems such as Swift, Money Gram, or Western Union can take a matter of days. This is primarily because international transfers require multiple banks as there's no universal banking network.

The company RippleNet works to streamline global communications between different banks and other financial institutions by using their cryptocurrency, XRP.

When traditional money is being exchanged, it needs to be filtered and processed through several different banks and exchanged between different currencies. As a capitalistic society, each bank takes its cut, through processing fees, making traditional money transfer between banks inefficient and expensive.

Is Ripple a Centralized Platform?

Due to the extensive Ripple nodes of validators, the oven argued that Ripple XRP is not a centralized platform.

While Ripple Labs has no control of XRP currently in the market, the ability for validators to operate the exchange system themselves even if Ripple Labs no longer existed supports the claim that Ripple is not a centralized platform.

The use of independent party validators and such an extensive network helps to instil trust in the system. Technically there is room for human coercion since there is such an extensive and randomized network of validators this is highly unlikely.

Although trading can be supported by validators alone, the influence that Ripple Labs can is undeniable, Ripple Labs not only can introduce more XRP to the market but still sells products and tools to banks for XRP.

Distribution of Ripple Shares

Ripple has been able to maintain its value through its limited amount of shares in circulation. With over 27 Billion XRP between the company and its founders, much stability is built into the system.

Although anyone can join the Ripple network to use and trade XRP, a user needs to have an XRP supported wallet which requires a minimum of 20 RXP to be in possession. Currently, over 40 Billion XRP are held by public entities in XRP wallets.

RippleNet has an additional 53 Billion XRP which has slowly been released for public use. 1 Billion XRP is added to circulation each month, this slow expansion of the market does not lead to a steady devaluation in Ripple currency.

There is a removal of XRP through transaction fees through each transaction, which gradually shrinks the supply, slowly increasing XRP value.

Whether you are a corporate or a rookie trader, it is essential to monitor the number of shares and valuation of shares in the market before buying.

SEC Files Against Ripple Labs

On December 22 of 2020, the United States Securities and Exchange Commission (SEC) filed a suit against Ripple Labs Inc., Two top executives, for illegally selling unregistered securities valued at 1.3 billion USD.

A reported lack of registration or qualifications for a registration exemption has been cited as grounds for the SEC to file these charges. This case filed claims that the Ripple chairman and CEO, Christian Larsen and Bradly Garlinghouse profited off the non registered sale of XRP.

This case is not ruling on a one-time incident it is stating that from at least 2013, 14.6 billion units of XRP were exchanged for USD as a profit for Ripple Labs Inc. This case is built upon Ripple never filing a registration statement on any profitable transactions since its introduction to the market.

Ripple received legal advice back in 2012 that told them that the trading of XRP could be considered an investment contract and would have to be classified as a security and be reported through the proper channels.

The SEC claims that Ripple created a veil of secrecy around these for-profit sales of digital asset securities.

On the defence side, Ripple revived legal advice back in 2012 that assured them that the trading of XRP could be considered an investment contract and would have to abide by a different set of regulations.

Ripple Labs Inc. executives have called this a politically motivated attack against crypto as a whole. Ripple CEO, Garlinghouse was quoted saying, "The SEC has permitted XRP to function as a currency for over eight years, and we question the motivation for bringing this action just days before the change in administration."

As an act of further politicization of the case, Ripple Labs executives have indicated that this may play a factor in deciding if their headquarters should move abroad or remain in the United States. They have also verbally expressed interest in a prosperous collaboration with the incoming Biden administration.

Ripple Lab's Defense

Regardless of the potential political motivations behind the SEC filing Ripple Labs has begun to develop its defence against the SEC.

Ripples argument in court relies very heavily on the idea of it being a centralized platform. Ripple Labs Inc. has no control over XRP once it is introduced into the system and profits primarily off the software it sells to banks and money transfer companies.

Ripple lawyers plan to prove that positive media around Ripple has not caused a shift in XRP value. One instance set to be cited the announcement of an exclusive partnership with Moneygram bolstered Moneygram stock by 170% whereas XRP value stayed stagnant.

Ripple Labs has also worked diligently to remove its name from association with XRP. When XRP was trademarked in 2013 coins were was referred to as "ripples", Ripple Labs not only stopped calling it that internally but petitioned the media to stop using the term as well.

These actions have shown an active effort to have XRP operate independently from the corporate structure at Ripple Labs.

Ripple Effect of Ripple

Since the SEC introduced charges against RippleNet, some of its significant partners have taken steps to separate themselves from controversy. Both other forms of cryptocurrency and financial money transfer services are trying to say way from the SEC's investigation.

Several cryptocurrency companies like Kraken and OkCoin have temporarily suspended XRP trading on their platforms. The lawsuit has also created a slew of controversy in the press and even led to lawsuits against other cryptocurrency companies.

Coinbase Suit

The Ripple SEC lawsuit has also had negative effects and produced bad media for other forms of cryptocurrency. Given the continued growth of controversy in the cryptocurrency industry, it is difficult for a company like Coinbase to enter the market with ease.

Cryptocurrency has much controversy around it and with Coinbase serving as a bank for crypto, it's hard to make concrete predictions on Coinbase streamlining their IPO. Between the natural delays that come in the IPO process to the growing attention on the lawsuit.

Coinbase is being sued for listing XRP because of the fees they receive. Although the plaintiff has presented a weak case claiming that not knowing the SEC would flag the XRP shows negligence on Coinbase, there is still potential for negative effects in the media.

Perhaps it may be more beneficial for Coinbase to go the direct listing route. Although until the release this is speculation we will see when shares debut we will see how large an effect the use of XRP has on Coinbase.

Educate Yourself on Crypto Market

Entering into the world of trading and being successful in it requires much education. Over the course of the past year, there has been a significant increase in the market are crypto, and here is why.

Many investors have turned to digital currency with the increase of online activity during the COVID-19 pandemic. Not only have we seen a rise in online sales but also an increase in online trading.

As companies worldwide have tried to recover their economies, you've seen an increase in money printing through various stimulus programs. Printing of money leads to inflation and said we've seen investors and traders get stock in cryptocurrency as an essential investment, as cryptocurrency is a noninflationary asset.

Investors may feel that cryptocurrency is a more secure asset. However, its value is subject to change with the market.

Stay Up to Date on XRP

As the Ripple Labs case with the SEC continues to develop traders and brokers and watching very closely.

It's important that you stay up to date with current events and are well versed in different crypto terminology. You will need to know Ripple XRP, Bitcoin, and other common forms of cryptocurrency to be successful.

It is essential to join the market or become a broker that you stay up-to-date with news regarding trading.

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