The SEC is claiming that XRP is categorized as a security, so therefore the sale of XRP to its American investors should be viewed as the selling of unregistered securities.
XRP Security Debate
This potential news has already had a big impact on the price of XRP, which is down over 17 percent following the news of the potential lawsuit.
Garlinghouse is adamantly against the filing of this lawsuit, stating,
“No other country has classified XRP as a security. The SEC has permitted XRP to function as a currency for over eight years, and we question the motivation for bringing this action just days before the change in administration. Instead of providing a clear regulatory framework for crypto in the U.S., (SEC Chairman) Jay Clayton inexplicably decided to sue Ripple — leaving the actual legal work to the next Administration.”
Garlinghouse has made it clear that he views XRP as a currency in the same way as Bitcoin or Ethereum, but the SEC is arguing that XRP is actually a security.
If XRP is deemed a security, it will add a lot of regulatory restrictions that are unwelcome by the community.
Ripple currently owns over half the supply of available XRP, and also uses the sale of XRP as a quarterly revenue stream. This is a much different approach than what is seen by the Bitcoin and Ethereum development teams.
Vitalik Fires Shots
Vitalik Buterin, the founder of Ethereum, took direct shots at the Ripple team after the announcement of the seemingly looming lawsuit, stating that the Ripple team is “sinking to new levels of strangeness” and that XRP is a “sh*tcoin.”
Buterin continued to berate Ripple and XRP, mockingly calling out the team for stating that Bitcoin and Ethereum are “Chinese controlled” and therefore XRP should also qualify as a currency.