Ripple, XRP, and SEC: All the essential answers you need
The Securities and Exchange Commission (SEC) in the United States has taken a significant step in regulating the growing digital currency market by filing an action against Ripple Labs Inc. and its management on the 22nd of December. The SEC claims that Ripple has failed to register their offering as an investment contract for investors, alleging that the company had launched an unregistered, ongoing asset securities offering to investors, raising more than USD 1.3 billion.
Ripple Network and its cryptocurrency XRP were established by Ripple Labs Inc. in 2012 as a global settlement network for value transfers. In the early days of cryptocurrencies, the issuance of tokens or coins was not subject to any legislation. However, as digital currencies have gained widespread adoption, authorities are working on developing regulatory structures to ensure compliance with the law.
The SEC, being the primary federal regulator in the United States responsible for enforcing federal securities laws, stipulates how companies are required to disclose their securities offerings. According to the Howey Test, an asset is considered a security if a person invests money in a common enterprise and expects profits solely from the efforts of the promoter or a third party. XRP, unlike Bitcoin, is not a decentralized peer-to-peer network, which could potentially classify it as a security under the Howey Test.
However, it's important to note that XRP is not currently defined as a security according to European legislation. The European Commission for Securities Supervision refers to the European Securities and Markets Authority (ESMA), which is the EU authority responsible for securities regulation and supervision to ensure the stability and integrity of the European financial markets.
In response to the SEC's action, Bitpanda, a popular European cryptocurrency platform, has decided to keep XRP listed on Bitpanda and Bitpanda Pro for the time being. Bitpanda is following the legal discussion between the SEC and Ripple Labs Inc. closely. The platform is diligently monitoring developments around the legal dispute in case new facts emerge.
In light of the SEC's action, Bitpanda will remove XRP from all Bitpanda Crypto Indices (BCI5, BCI10 and the BCI25) as part of the index rebalancing event at the end of December 2020. Bitpanda will keep users posted as the matter progresses.
As the regulatory landscape for digital currencies continues to evolve, it's clear that companies operating in this space need to be mindful of securities laws and regulations. The ongoing legal dispute between the SEC and Ripple Labs Inc. serves as a reminder of the importance of regulatory compliance in the digital currency market.
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