As a project, Ripple (CCC: XRP-USD) has had a rocky road. The coin has dropped from a high of more than $3 in early 2018 to a current price of around 45 cents. Compared to Bitcoin (CCC: BTC-USD), Ripple appears to be even worse, as Bitcoin’s price has more than doubled over the same time.
It speaks to Ripple’s strength that it could withstand such a blow and keep moving forward in the wild west that is the crypto space. Ripple, on the other hand, deserves some credit. Despite its recent underperformance, it remains the world’s sixth-largest crypto asset. Furthermore, despite being chastised by the Securities and Exchange Commission (SEC), it has managed to maintain its position.
SEC Takes Aim
The SEC filed a significant enforcement action against Ripple on December 22. It claims that Ripple’s management improperly sold $1.3 billion in unregistered securities to the public. The SEC goes on to say, among other things, that:
The Securities and Exchange Commission (SEC) has a transparent disclosure process that must be followed when securities are listed for sale to American investors. The SEC alleges that Ripple violated regulatory guidelines in this case. Furthermore, Ripple insiders have made a tidy profit of $600 million from the unregistered securities. If true, this is a serious breach of standard operating procedure, and it could be a major setback for Ripple as a whole.
The SEC’s action revolves around a central issue. According to the SEC, Ripple is selling stock to the general public rather than currency. Because precious metals, such as gold and silver, are hard assets rather than shares of an operating entity, they have long operated in a different regulatory environment. However, the SEC claims that Ripple is acting as a corporation, issuing tokens to fund its operations. As a result, XRP is governed by it, unlike currencies governed by a different set of rules.
Following the SEC’s action, many exchanges stopped trading the Ripple coin, according to Ripple. As a result, 33 different firms have taken restrictive actions against Ripple, according to Ripple. Because it is illegal to buy and sell unlicensed securities in the United States, U.S. exchanges were rapid to stop trading the Ripple token.
Trading Volumes Rise Anyway
Despite what appeared to be a major setback for the company, Ripple persevered. Its net XRP sales nearly doubled in the last quarter. It claimed that the Asia-Pacific region’s strength more than compensated for the loss of North American business. The volume of XRP trading increased even more. Much of this is likely due to the massive rally in cryptocurrency as a whole rather than any particular confidence in Ripple.
Nonetheless, it was easy to imagine a scenario in which Ripple’s usage would have plummeted once it was subjected to regulatory scrutiny. That has not occurred. And that can only be a good thing for the project’s future. If Ripple can reach a quick settlement with the SEC and move on, it may be able to recoup some of its losses from the 2018 peak.
Personally, I try to stay away from investments that the Securities and Exchange Commission is investigating. There are plenty of things to buy in the world, so there’s no need to rush into XRP or anything else that is currently under investigation by the government.
Nonetheless, despite the SEC crackdown, Ripple has continued to post strong usage numbers recently. You’d think that losing all those exchanges would have had a bigger impact on Ripple. Despite this, the community appears to be quite active. If and when the SEC complaint is resolved, this could make Ripple worth another look.