Is XRP classified as a security? – New evidence emerged
On August 5 2019 a lawsuit was filed against Ripple. The lawsuit argues that the company's tokens are unregistered securities under the U.S. Securities and Exchange Commission.
The lawsuit also alleges that the establishment of the Distributed Ledger violated a number of California laws. Ripple is said to have “blurred the differences between Ripple's and XRP's corporate solutions to further increase demand” and “paid for exchanges to list XRP and increase demand”.
New evidence has now emerged that supports the argument that Ripple was the driving force behind the development of XRP. The data also suggests that the company and its members sell this cryptocurrency to enrich themselves.
The arguments of the SEC
William Hinman, director of the SEC's Division of Corporation Finance, believes there are several elements to determining whether a digital asset is a security. The main factor is whether a “third party drives the return expectation” and whether the funds are used to “increase the company's value”.
“Has the promoter raised capital beyond what might be required to build a functioning network, and if so, has indicated how it works Can funds be used to support the value of the tokens or to increase the company's value? Does the promoter continue to spend funds from the proceeds or operations to improve the functionality and / or value of the system in which the tokens are operated? ”
Based on Hinman's perspective, it appears that XRP meets all the criteria to be considered a security. Ripple's business model is based on the sale of solutions for cross-border payments to banks and transfer providers. But the bulk of the revenue comes from selling XRP on public exchanges and private financial institutions with the goal of increasing the company's value.
Evidence suggests that XRP is a security
In the year 2018 David Schwartz, Ripples CTO, admitted that the company's main source of income is and is the sale of XRP Ripple appreciation funds are used.
“A million dollar value in XRP will always cost a million dollars. But the higher the price of XRP, the more money Ripple makes by selling XRP, the more money Ripple is worth, the more power Ripple has to reward partners… ”
Schwartz also revealed that Ripple owns most of XRP's overall offering, and admitted that selling software to institutions doesn't generate as much revenue as a token price increase.
“Ripple will almost certainly be the largest owner of XRP for the foreseeable future. For every penny XRP's price rises, the fictional value of Ripple’s XRP increases by $ 600 million … Ripple makes money selling software to banks. But how many banks do you think Ripple would have to close to earn $ 600 million in license / support fees? That would correspond to the value of a sustainable price increase of one cent for XRP. ”
The exponential price hike that XRP has seen in recent years has indeed helped the Ripple team add value. According to a Bloomberg report, co-founder Jed McCaleb alone, who is no longer with Ripple, sells half a million XRP a day. In the meantime, David Schwartz has 2019 2.8 million XRP worth about 810. 000 dollars sold and Brad Garlinghouse, Ripple's CEO, appears in the year 2017 23 to have sold millions of XRP.
Proof of text: cryptoslate