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NEW YORK (REUTERS, BLOOMBERG) – XRP cryptocurrency dived on Wednesday (December 23) after the U.S. Securities and Exchange Commission (SEC) accused blockchain company Ripple of making a bid for unrecorded values of US $ 1.3 billion (S $ 1.7 billion).
XRP, the third-largest cryptocurrency by market value, plunged nearly 40 percent to about 26 cents, pushing its total weekly losses to more than 50 percent and wiping out about $ 10 billion in market value. .
The SEC contends that Ripple chairman, co-founder and former CEO Christian Larsen and current CEO Brad Garlinghouse “did not register their XRP offers and sales or comply with any registration exemptions.” Larsen and Garlinghouse also orchestrated $ 600 million worth of unrecorded personal sales, the SEC alleged.
Ripple has rejected the charges, saying that XRP is a currency and does not need to be registered as an investment contract. Garlinghouse called the case “an assault on crypto in general,” in a message to employees that was posted on the company’s blog. The SEC did not want to encourage innovation in the digital asset space, he said.
Financial regulators around the world are still grappling with how to regulate Bitcoin, XRP, and rival cryptocurrencies. Markets are closely watching regulatory developments that could determine whether cryptocurrencies make the leap from niche to major asset.
XRP, which often moves in tandem with Bitcoin, soared in November to hit its highest level since 2018 as a rally in cryptocurrencies accelerated.
The Bitwise 10 Crypto Index Fund (ticker BITW), which has risen nearly 180% since its launch on Dec. 9, liquidated its position in XRP, which comprised 3.8% of its holdings, according to a statement Wednesday.
Not only is Ripple in “hot water” and unlikely to beat the SEC’s demand, but XRP may become more difficult to trade and transact in case the US markets are unwilling to include it, according to a report from Bloomberg Intelligence (BI).
“At stake in the Dec. 22 lawsuit may be the ability to trade XRP and more than $ 1 billion, although it is also possible to settle for a fraction of that,” wrote BI analysts Elliot Stein. and Ben Elliott. “Ripple also risks a court ruling that XRP is a security, which would subject it to stricter SEC rules that may slow down transactions, as US virtual markets may be reluctant to list XRP because of at the risk of facilitating the sale of a potentially unrecorded security. “
Unlike Bitcoin or Ether, which the SEC considers currencies and is decentralized, the value of XRP was tied primarily to Ripple’s products, with the company attempting to influence supply and demand for the token, the analysts wrote.
Although Bitcoin, the largest stake in BITW, maintained slight gains, the fund fell by about 9.5 percent.
At least one digital asset trading platform has moved to eliminate XRP in the wake of the SEC’s lawsuit. Hong Kong-based OSL said it has suspended cryptocurrency trading.
The SEC said in July 2017 that companies raising money by selling digital assets must comply with federal securities laws. BI expects Ripple to respond to the agency’s complaint next quarter, and that it could make a decision in early 2022.
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