An important chapter was written in July 2023 for a battle that has lasted three years and that has been closely followed by the entire cryptomarket, including the asset tokenization: the victory of the XRP cryptocurrency in the Ripple x SEC dispute.
The legal dispute that has been going on since 2020 has at its center the issue that is driving discussions even in Brazil given the continued growth of the market for monetary tokens (digital currencies) and business tokens.
Can and should cryptoassets be considered securities?
Despite the fact that bitcoin emerged almost 14 years ago, it is with the diversification of digital currencies that issues related to their legality and their fiscal position in the market have gained prominence and are discussions that contribute to the visibility and credibility of crypto-assets.
BLOCKBR, a company that develops tokenization infrastructure, will talk about the decision in the SEC x Ripple dispute and its impacts on the crypto market!
SEC AND RIPPLE: THE CHARACTERS OF THE LEGAL CLAIM
WHO IS RIPPLE?
Ripple is a financial technology company focused on blockchain-based digital payments, manager of the XRP cryptocurrency – which bears the company’s name – and the global payments and settlement platform RippleNet.
- XRP is a cryptocurrency designed to make transfers of monetary value around the world faster and more efficient;
- RippleNet is a network of financial partners, such as banks and payment service providers, to improve the speed and efficiency of cross-border transactions.
Ripple, unlike other cryptocurrencies, does not use blockchain technology, nor is it mined with mining protocols, but a proprietary technology that reduces transaction costs, in addition to using less energy than digital currencies like bitcoin.
Ripple is basically a brokerage currency token that aims to facilitate the exchange of other fiat and digital currencies. For this reason, there is no strategy for it to be as popular as BTC and ether as a means of payment.
WHO IS SEC?
The SEC is the U.S. Securities And Exchange Commission and corresponds, in Brazil, to the CVM (Securities Commission).
The SEC’s main responsibilities include:
- Market regulation of securities to be traded in the market;
- Inspection of the registration of securities of private and public companies before they are offered to the public, ensuring complete and transparent disclosure of information to which investors must have access;
- Protection of investor interests by promoting transparency and integrity in securities markets;
- Enforcement of laws and regulations to curb fraudulent practices, market manipulation and insider trading;
- Monitoring the performance of companies operating in the market – banks, securities brokers, credit companies, cryptocurrency brokers – exchanges – and tokenization companies.
The SEC is not criminal, only investigative. When there are suspicions of financial wrongdoing, it forwards the case to the Public Prosecutor’s Office.
How is the regulation of the digital revolution of tokenization in Brazil? Know more!
UNDERSTAND THE RIPPLE X SEC CASE
In 2020, the SEC filed a lawsuit in the US court questioning Ripple’s operations with institutional buyers between 2013 and 2020 as, in its opinion, they would be transactions offering XRP as an investment product and projecting future earnings.
In addition, it claimed that Ripple would have raised around $1.3 billion from this XRP trade. As a result, the action was filed as an issue of an unregistered security, since, classified as such, the cryptocurrency would have to be registered with the body.
At the end of 2022, the currency token company delivered its defense claiming that there was no proof from the SEC that the transactions would be securities.
On July 13, 2023, Judge Analisa Torres, of the Court for the Southern District of New York, ruled in favor of Ripple, stating that XRP is not a security.
RIPPLE’S VICTORY
There is no doubt that Ripple achieved a great victory with this decision, which reaffirms XRP’s status as a cryptocurrency, avoiding submission to SEC rules, which would deprive the company of much of its operational agility and market attractiveness.
This verdict also favors other cryptocurrencies, as the decision can be extended to them, ending pending lawsuits and preventing new lawsuits from being opened whose legal matter is the same as the Ripple case.
Furthermore, a decision in favor of XRP strengthens the image of cryptocurrencies, which is fundamental in times of scandals such as the FTX bankruptcy in 2022.
The tokenization of assets, despite not involving monetary tokens but business tokens and a digitized supply vehicle, also benefits from the decision, since questions about digital currencies always reach, in some way, the cryptomarket as a whole .
On the other hand, it is important to highlight some points of this decision:
- The status of a currency token (rather than a security) only applies to retail XRP operations through exchanges;
- In XRP transactions with institutional buyers, Justice maintained the view of ripple as a security, therefore subject to SEC regulation;
- The SEC can appeal the decision in the second instance. Rumors in the market are that the agency should take the case forward.
Therefore, despite the current favorable decision, new chapters of this soap opera will happen!
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TOKENIZE YOUR ASSETS WITH BLOCKBR!
Tokenization is a reality that is becoming present in all segments and business models, it is not something so innovative that it should still be seen with suspicion. Companies and individuals are currently monetizing tokens.
Recent actions by BACEN and CVM signal that tokenization is legal and the digital real will be a great divider to increase the credibility of technology for those who want to invest in tokens.
Offering your business token is simpler than you might think. Do you want to see the competition come out ahead?
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We have the best token offering strategy on the market!
BLOCKBR Digital Assets is a fintech specialized in tokenization of assets and investments that delivers infrastructure to the regulated and non-regulated market through an All-In-One platform that offers the transformation and interoperability between assets and investors.
For more information, visit: http://www.blockbr.com.br or @blockbr_ on social networks
