European Corporate Governance Institute Recognizes XRP as Non-Security, Reports Ripple News
XRP’s value continues to decline in response to market news, and with Bitcoin also experiencing a downturn, the future prospects for XRP appear bleak. Adding to the challenges faced by XRP, the European Corporate Governance Institute (ECGI) recently published a research paper asserting that XRP should not be classified as a security, aligning with a previous U.S. federal court ruling.
The study, titled “Corporate Governance Meets Data and Technology,” was authored by Wei Jiang from Emory University and Tao Li from the University of Florida. It explores the regulatory landscape surrounding token offerings, with a specific focus on securities regulations and token classification.
The research paper sheds light on the various fundraising methods employed by blockchain-based startups, such as initial coin offerings (ICOs), initial exchange offerings (IEOs), and security token offerings (STOs). It emphasizes the scrutiny that these methods face, particularly regarding the classification of the tokens issued.
Notably, the paper uses Ripple and its native token, XRP, as a case study to discuss regulatory concerns. It highlights the Securities and Exchange Commission’s (SEC) lawsuit against Ripple Labs, which claimed that XRP sales violated U.S. securities laws.
However, the scholars point out that on July 13, 2023, a U.S. federal court ruled that XRP was not classified as a security when sold to the public on exchanges. The study clarifies that XRP could be considered a security when sold directly to institutional investors.
This recognition by the ECGI is significant for XRP, particularly amidst the intense scrutiny from the SEC. It serves as an example of how tokens like XRP are approached and classified within regulatory frameworks.
Legal expert Bill Morgan responded to the research, stating that although XRP is not considered a security, it could still be involved in transactions or schemes that fall under securities regulations. This distinction helps clarify the role of XRP within the regulatory landscape.
Morgan notes that while XRP may not be classified as a security, it could still be subject to securities laws if it is used in an offering that meets the criteria of an investment contract under the Howey Test. The Howey Test is a legal framework used by U.S. courts to determine whether certain transactions qualify as investment contracts and, therefore, securities.
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Crypto Regulations
Ripple (XRP)