We Need A Ripple Test To Stop The SEC’s Overreach On Cryptocurrency

By Roslyn Layton. May 18, 2021. (Forbes).

The regulatory future of cryptocurrency seems destined to be decided by the courts, thanks to an ill-conceived lawsuit filed by the Securities and Exchange Commission. If Ripple’s arguments prevail in the Southern District of New York and on appeal, this case could give the Supreme Court a chance to review the 1946 Howey decision which set a standard for what constitutes a security. 

Courtroom Showdown

I’ve covered the SEC’s case against Ripple Labs case since it was filed by the SEC in December 2020 because it had all the hallmarks of classic enforcement overreach. Ripple and cryptocurrency investors have fought back with robust arguments while the SEC has stumbled and exposed its former leaders’ troubling conflicts of interest. It looks like something bigger than a mere lawsuit. The historical moment adds urgency to resolving whether XRP is a currency or security, a question which financial innovation makes difficult, but also demonstrates the SEC’s abuse of its authority.

The total market cap of all cryptocurrencies, including the XRP digital token at the heart of the Ripple case, tops $2 trillion dollars. The sum of these digital assets is now worth more than the total number of U.S. dollars in circulation. Global companies like Goldman Sachs and PayPal are racing to adopt the technology for consumer products. But more ominously, China has already rolled out a central bank digital currency (CBDC) called the Digital Yuan for domestic commercial and consumer use on a big scale. Mastercard has opened talks to act as a financial bridge for China to expand the Digital Yuan’s global network, export its applications and compete against both cryptocurrencies as the U.S. dollar in the emerging digital economy.

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SEC’s View That Crypto Tokens Are Securities Causes Legal Woes for Ripple

By Ciaran Connelly – Feb. 11, 2021 – Bloomberg Law

The SEC’s enforcement action against Ripple and its principals illustrates the factors used to determine if a digital asset is a security. Blockchain companies should tread carefully until the U.S. regulatory landscape for crypto tokens is reformed, warns Ciaran Connelly, a partner and head of blockchain law at Ball Janik LLP.

Over the past month, Ripple Labs Inc. has been beset by legal difficulties stemming from its sale of XRP—a digital asset or crypto token. In late December, the Securities and Exchange Commission filed an enforcement action alleging that XRP is a security and that Ripple and its principals had sold nearly $1.4 billion worth of XRP in unregistered securities sales since 2013.

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