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Cryptocurrency XRP drops after Ripple says it faces USA lawsuit

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Cryptocurrency XRP drops after Ripple says it faces USA lawsuit

"Ripple also risks a court ruling that XRP is a security, which would subject it to stricter SEC rules that may curb transactions as USA virtual marketplaces may be reluctant to list XRP due to the risk of facilitating the sale of a potentially unregistered security".

Crypto Platforms Delist XRP, Will More Follow?

The escrow is meant to standardize the supply of XRP that could come from Ripple, even during times when the price andvolumes of XRP have increased. The US watchdog alleges that the company and its executives sold more than $1.3 billion worth of the digital currency unlawfully.

XRP, the world's third-largest cryptocurrency, slumped after Ripple Labs Inc. said it faces a U.S. Securities and Exchange Commission lawsuit over its affiliated token. According to the filing, co-founder Chris Larsen and CEO Brad Garlinghouse also "effected personal unregistered sales of XRP totaling approximately $600 million".

"XRP is a currency and does not have to be registered as an investment contract", Garlinghouse said. Current regulations demand that all companies selling securities must register with the agency.

Hong Kong-based crypto exchange, OSL, announced earlier today that it would suspend every transaction involving XRP, including trading and payment services, on all of its platforms until the issue is resolved.

The Bitwise 10 Crypto Index Fund (ticker BITW) - which has surged almost 180% since its December 9 launch - has liquidated its position in digital asset XRP, which comprised 3.8% of its holdings, according to a Wednesday statement.

Whatever the outcome, the spat is likely to put downward pressure on XRP as investors cash out their holdings in favour of less contentious assets.

If the SEC wins the pending lawsuit, the outcome won't only impact the legality of Ripple and other companies selling XRP. With backing from venture capital firms including Andreessen Horowitz and Peter Thiel's Founders Fund, Ripple forged partnerships over the last several years with Bank of America and PNC, among others.

Source SBI Holdings
Source SBI Holdings

The SEC is seeking an injunction to order Ripple, Larsen and Garlinghouse to "return their ill-gotten gains", prohibit them from participating in any offering of digital asset securities and impose civil money penalties.

Understandably, the news has had a negative impact on the price.

When Ripple was founded, its founders created 100 billion XRP, and 80 billion of this was transferred to the company while the remaining 20 billion was "gifted" to its founders.

However, at the time of writing, the 24-hour trading volume at this exchange stands at Dollars 90,000, while XRP's trading volume is only USD 11, per Coinpaprika.com data.

In the days following, the XRP price has dropped by around 36%. The coin now trades for $0.37 and has once again become the fourth largest crypto asset by market capitalization, trading below Tether's USDT.

As of Wednesday afternoon, the suit had caused XRP's market capitalization to plummet by almost 50 percent, to $12.6 billion from $21.6 billion earlier in the week.

A Threat to the Wider Industry?

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