Even though I own some Ripple (CCC:XRP-USD) cryptocurrency coins, I haven’t followed every step of the Securities and Exchange Commission (SEC) lawsuit that initially leveled the underlying company Ripple Labs. To me, it’s a moot point. With traders in the U.S. essentially locked out of transacting their XRP holdings, I find myself in the classic irony of the shipwrecked: so much water, none of it drinkable.
Setting aside my personal feelings about the so-called Ripple coin, however, the developing company just might secure a legal victory.
Now, I should reiterate that nothing I have to say about XRP or any other matter is financial advice. And on that note, nothing I say about the SEC lawsuit should be construed as legal advice. I’m just a casual observer making observations and writing about them.
But my, what an observation this is! Attorney Jeremy Hogan, a lawyer who sides with Ripple regarding its legal battel against the SEC, stated the following:
Ripple never held an ICO [initial coin offering] because the XRP ledger was ALREADY in existence when Ripple was formed. So, prior lawsuits against companies that held ICOs do NOT tend to show that Ripple had Fair Notice that what it was doing was illegal. Ripple is making an important distinction here.”
If that’s the case, that might limit the SEC’s arguments against Ripple Labs. Without defining what a cryptocurrency is and what an ICO is, it’s difficult to accuse an entity of a violation. That’s akin to charging someone with a speeding violation without first establishing speeding laws.
However, the SEC could still press Ripple, arguing that any novel attempt to sidestep already existing laws regarding initial public offerings would constitute a securities violation. Whether you call XRP an ICO or not, if it has the “spiritual” components of an IPO, it could be fraud.
Don’t Miss the Bigger Point About Ripple
Now, please note that I’m just playing devil’s advocate regarding the SEC mindset. Honestly, I don’t know what the SEC is thinking, nor do I have insider information regarding the outcome. Logically, this also means I don’t know how this lawsuit will ultimately affect XRP.
While the complexities of the XRP legal battle provide much intrigue, I’m more interested in what this controversy represents for cryptocurrencies. All this talk about democratization and decentralization has got me thinking: no matter how appealing a blockchain-based project is, everything ultimately gets centralized.
I must apologize for being such a bundle of joy lately but folks, I can’t help but ask the question: isn’t the decentralization and democratization of money argument just like the free range chicken narrative? Free range or not, the chicken’s fate is still the same.
In the same vein, it ultimately doesn’t matter if the SEC wins or not. The federal agency sent a very powerful message. You can run in decentralized la-la land all you want but, in the end, you can’t hide. That’s because whether you want to buy a house free and clear or drive the seemingly ubiquitous Lambo, you’ve got to come back in to the system.
Of course, that’s when the agencies — the SEC for the distributors and the IRS for the users — will get you, flashing lights and all.
True, XRP is tied to a (functionally) decentralized infrastructure. And through its blockchain architecture, Ripple is able to facilitate cross-border payments at lightning-fast speeds and lower costs. Further, investors in XRP are able to enjoy profitability outside the mainstream system.
But again, when you want to actualize that profitability, you’ve got to come back in. That’s when we all meet our governmental butcher.
If You Want to Play, You’ve Got to Pay
Take a trip to El Salvador from now on and you may soon be greeted with signs everywhere that read, “Paga aquí con bitcoin.” Basically, Bitcoin (CCC:BTC-USD) is accepted here.
As you probably heard, El Salvador became the first nation to accept the cryptocurrency as a parallel legal tender. It’s a remarkable move that on paper should be the massive credibility boost that crypto proponents were long seeking. Well, someone needs to tell that to the Bitcoin price.
While the price did move higher on the news, the level where it currently sits — a hair shy of $37,000 — is incredibly unremarkable. This was the crypto that breached the $64,000 threshold and legitimately appeared to have a chance of cracking six digits. Now, proponents are hoping that it doesn’t fall below 30k.
I think this too is a warning for XRP. Even if Ripple wins its lawsuit and gains back trust from exchanges that dumped the underlying coin, the virtual currency market is wildly unstable. Therefore, it could still lose despite winning meaningful victories.
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On the date of publication, Josh Enomoto held a LONG position in XRP and BTC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.