Will the SEC target “Ripple Stablecoin” in their next move?
The realm of stablecoins pegged to the USD is ablaze, rapidly approaching an astonishing milestone of $165 billion! Both new players like Ethena’s USDe and industry giants like PayPal and Ripple are shaking up the fiercely competitive arena. Ripple, in particular, has set its sights on the stars, envisioning a jaw-dropping $2.8 trillion market by 2028. While Ripple sees stablecoins as a tremendous opportunity for the crypto industry, the SEC views them as potential violations of security laws in the future.
So, what exactly is prompting the SEC’s actions? Let’s delve into it.
The SEC has taken aim at Ripple’s stablecoins, even before their official launch. In a recent filing, the SEC reiterated that stablecoins are considered “unregistered crypto assets.” Their argument revolves around Ripple’s history of selling unregistered XRP, suggesting that the company may commit future violations of U.S. securities laws. The SEC’s scrutiny extends to Ripple’s upcoming stablecoin, which they categorize as another unregistered crypto asset.
Ripple had announced its dollar-backed cryptocurrency in early April, positioning it as an “enterprise-grade” stablecoin that would operate on both the XRP Ledger and Ethereum. The company aims to bridge the gap between traditional finance and the crypto space with this stablecoin. Ripple’s CTO, David Schwartz, has disclosed that the stablecoin’s name will be unveiled in June.
In response to the SEC’s concerns regarding potential future violations of U.S. securities laws, Ripple argues that it has obtained licenses from various jurisdictions, including some that do not classify XRP sales as securities sales. However, the SEC dismisses this argument as absurd, likening it to a New York restaurant claiming it doesn’t need a liquor license because it obtained a fishing license in California.
The legal battle is approaching its conclusion, with the SEC seeking a permanent injunction due to Ripple’s heavy reliance on selling XRP to On-Demand Liquidity (ODL) customers. In a previous ruling, U.S. District Court Judge Analisa Torres found Ripple guilty of violating security laws through direct sales of XRP to institutional investors. The SEC accuses Ripple of attempting to recycle arguments from summary judgments. They advocate for a significant penalty to deter future violations, asserting that Ripple’s proposed $10 million is insufficient. They argue that penalties should align with the illicit gains, as is customary in court.
In response to the SEC’s position, Ripple’s top lawyer, Stuart Alderoty, remains optimistic about reaching a resolution by the end of the year if both parties adhere to the deadlines. He criticizes the SEC for what he perceives as a misapplication of the law but acknowledges progress toward resolving the lawsuit.
Tags: Ripple (XRP)