Source: Pixabay Ripple CEO Brad Garlinghouse states that XRP’s uses by other companies show it isn’t a security.
Is XRP a Security? Ripple’s Brad Garlinghouse Answers
Ripple (XRP) has gained increasing popularity over course of its lifespan. Beginning as another example of how digital currency could shape how current processes were run, it has evolved to show that its particular type of distributed ledger functionality can be used for many more things that could be revolutionary. Ripple has also gained popularity through the company’s transparency, in part due to a series of Reddit AMAs (Ask Me Anything) with CEO Brad Garlinghouse, which attempts to answer questions potential investors and those interested in using Ripple may have. One question, the potential answer of which has helped contribute to Ripple’s potential differentiation from the likes of Bitcoin and Ethereum as a crypto coin, is this: is XRP a security or not?
Ripple CEO Brad Garlinghouse Says “No”
Garlinghouse comes flat out of the gate in a December 2018 AMA and states that no, Ripple (XRP) is not a security – and there are many incremental reasons for this. His major reasoning for this was that if the company Ripple were to ever shut down, then XRP would still be traded across platforms and exchanges. Indeed, some exchanges, such as Coinbase, are even discussing bringing Ripple in due to the demand and popularity of it and its many uses. Garlinghouse states that as Ripple is just a participant in the XRP ecosystem, XRP cannot be considered a security. He then went on to suggest that he understands the difficulties faced by the Securities and Exchange Commission (SEC) and wants to work with them going forward to ensure that they fully appreciate the differences between Ripple and XRP and the complexities present in the entire cryptocurrency sphere.
Source: Pixabay XRP is on the rise and will likely be featured on many more crypto exchanges.
Why Do Regulators Think XRP is a Security?
XRP does perhaps have an advantage in that several other companies besides Ripple are using distributed ledger technology. 2014 tech startup Omni raised $25 million in XRP for its on-demand property storage and rental marketplace. The company used to do this since went bust, and regulators honed in on the fact that the massive amount of XRP raised could be considered a security as a result. Instead, Omni then decided to let users rent out their belongings to other Omni users, who can cash out their dollar balance into XRP. Thus, XRP was being used by the company as a payment mechanism. Those using Omni who want to steer away from XRP can do so with no obligation to participate.
The main issue with XRP being thought of as a security is that it would then be subjected to further scrutiny and regulation. As we can tell from Bitcoin (BTC)’s 2009 debut, the decentralised nature of the cryptocurrency was the major draw to show that it had the potential to change how processes were conducted. So, to be deemed a security would hamper XRP’s future going forward. As the definition XRP goes beyond that of an equity security, a debt security, and a derivative security, it is clear that XRP is not a security. Ripple is currently the focus of a class-action lawsuit wherein XRP is being accused of being a security and that it should therefore be subjected to the same scrutiny.