The case revolves around the question of whether XRP is a security or not. The SEC has given the definitive guidance on the topic, which is based on the Howey case:
> The U.S. Supreme Court's Howey case and subsequent case law have found that an "investment contract" exists when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.[5] The so-called "Howey test" applies to any contract, scheme, or transaction, regardless of whether it has any of the characteristics of typical securities.[6] The focus of the Howey analysis is not only on the form and terms of the instrument itself (in this case, the digital asset) but also on the circumstances surrounding the digital asset and the manner in which it is offered, sold, or resold (which includes secondary market sales). Therefore, issuers and other persons and entities engaged in the marketing, offer, sale, resale, or distribution of any digital asset will need to analyze the relevant transactions to determine if the federal securities laws apply.
Ripple (as distinct from the XRP token it created), currently holds a large block of uncirculated XRP created at the beginning of the network. This network does away with mining in favor of the Ripple Protocol Consensus Algorithm:
This protocol foregoes mining in favor of a system without proof-of-work. The tradeoff (or feature, depending on how you look at it) was that the distribution mechanism would involve Ripple itself giving away and selling XRP. This gave Ripple complete control of the money stock at the network's inception.
This is very different from how Bitcoin currency distribution works.
Been following cryptocurrency for almost a decade now. I would generalize that XRP is an asset that is primarily purchased by speculators with sour grapes that they missed <$1 Bitcoins, and hope to see the same sort of returns despite the significant differences in technology and organizational structure.
I don't feel like there is much 'smart money' investing in XRP, so I think increased regulatory oversight is probably beneficial here.
Does Jed McCaleb (original Ripple founder and current Stellar CTO) get off scot-free? He's sold XRP worth $175m and owns $billions more. But it looks like he may be saved by the statute of limitations! He left in 2013 and a quick search indicates that the statute of limitations may be 5 years. It would be pretty crazy if this was all ruled illegal and he got to keep it all because the SEC took longer than 5 years to get in gear.
No use ever, past, present and future for XRP and Ripple products... it is already flopping after spending a fortune and printing a huge amount of totally useless XRP. (Now the XRP army of Twitter trolls, bots, hired guns and zealots will attack again...)
I had the honor of meeting Nouriel at the World Economic Forum, at an event held by CV VC (a Swiss blockchain/crypto-focused VC which also invested in my startup).
He gave a scathing talk criticizing cryptocurrencies and blockchains and all other things in the space. I shook his hand afterwards and told him that while I disagreed with some of his opinions, I really respected his conviction to give a talk to a room full of "crypto zealots" and stick to his opinions.
A very kind fellow in conversation, but he sure knows how to deliver bitter critique.
I think the best quote was from Matt Levine in his "Money Stuff" Bloomberg column. I can't find it right now but it was essentially he was talking about paper key practices and said:
"Imagine you go into a room of computer scientists and say: 'I've developed the most secure form of money possible, it's so secure you can't keep it on your computer and you have to dig a hole in your backyard and keep it there' you'd be laughed out of the room."
Yeah good thing you stayed out of this no use crypto currencies stuff for the last five years, you would have lost a fortune, because well, it has no use and nobody wants it.
Ironically, this could increase the exchange rate for XRP. Ripple controls a large block of uncirculated token that it sells. With this legal action, I suspect that supply will no longer be entering the market.
Unlike Bitcoin, which issues new currency units through mining, XRP is issued by Ripple. The case against Ripple appears to revolve around this point: is the XRP token a security?
If history is any indicator, the fundamentals don't actually matter.
The only things that matter are hype, and people buying/selling according to what people think other people are going to do.
Nearly every crypto-related story comes with narratives that it's good for the exchange rate for various reasons, but ultimately the price goes up (temporarily) because people expect other people to expect the price to go up and want to get ahead of it.
For an illiquid commodity like gold, I could see this being true. But in the crypto markets, participants have plenty of other choices. More likely is the "fire sale" scenario that was so wonderfully depicted in the film "Margin Call". Early investors are willing to unload at pennies on the dollar just to survive another day ;)
Looks like CrossTower has already de-listed XRP from its exchange. Incredible how fast information gets digested in crypto markets!
XRP is a security, so is Ethereum, as both have been issued to collect initial funding. Bitcoin is not a security because it hasn't been issued to collect funding.
To me the distinction is very clear and simple. However if I really needed money I still would probably issue an ICO and claim it is not a security because there is a big possibility that it will go unnoticed as SEC goes only after the bigger fish.
Or XRP can just evaporate since the infrastructure required to actually distribute it will no longer be available once the company goes bankrupt (having to pay the various fines and lawsuits that follow).
But otherwise this document spells out everything that Ripple/XRP critics have been trying to drill into XRP Army conscripts for half a decade.
That Ripple is in the business of selling XRP and uses ambiguity between the context of “ripple” and deflection to say there are third parties using enough XRP to make it scarce in the future. When this was never happening, and to this day is not happening.
The complaint mentions a third party that paid to get XRP this year to use a Ripple Labs product. They bought the XRP from Ripple to the tune of $70mm and immediately sold it on the public markets.
I think the illusion is shattered with this complaint. But XRP should be able to retain its transfer usage, just back at 2013 price levels.
That would be kind of cool in a sense, because it would do exactly the opposite of what the SEC would want. The SEC may then start to realize that they don't have the power to control the crypto market, and that it's going to blow up on them every time they try to attack. The higher price could also be used to fund better lawyers and lobbying against the SEC.
Not necessarily in support of Ripple specifically, but I do think having something that can actually challenge the SEC and reduce them to tears is a good thing. There are lots of things about the capital economy that could use change.
Ripple is everything you don't want in a cryptocurrency:
- centralized (as witnessed by the fact that the SEC has an actual target to go after)
- "pre-mined" (initial Ripple crowd gave themselves everything and once in a while toss a handful of XRP to the plebs)
- controlled by scammers
I'm very glad the ecosystem is doing what it's supposed to: weeding out the weak and ill-formed.
The narrative was that Ripple was going to become the protocol used by banks to transfer money around, especially across borders.
The pitch was that Ripple, the company, was going to sell XRP, the cryptocurrency, to the general public in order to fund all of their growth. Then, when banks ostensibly adopted XRP for their banking needs, the banks would be forced to pay exorbitant amounts of money to buy the artificially-scarce XRP from all of the speculators who got in early.
Everyone conveniently ignored the fact that large banks are not dumb, and they had no real reason to use a currency literally invented out of thin air to power their transactions. If banks really wanted to use cryptocurrency to trade among themselves, they'd obviously just roll their own cryptocurrency. Or they'd just copy-paste the permissively licensed Ripple code and call it something like BankCoin. No one could ever give me a good reason why banks would have no choice but to buy up arbitrary XRP from general public speculators.
My understanding: Ripple is a company that aims to build a faster bank transfer protocol (faster than SWIFT, for example).
To achieve that speed, banks transfer a digital currency (XRP) issued by Ripple instead of traditional currencies. It takes a few seconds for XRP transactions to settle, instead of days for traditional currencies via SWIFT.
The value of this currency is decentralized, in the sense that people trade it with other currencies (which is also how Bitcoin, Ethereum etc. are valued).
In the eyes of the SEC, the fact that XRP is directly issued by Ripple makes it similar to issuing shares. Even if Ripple doesn't control the value of the shares (XRP), they still manage the supply.
As I recall Ripple was originally a network-of-issuers for multiple issuer-specific tokens model, it wasn't supposed to be a single-issuer/single-token. The XRP token itself was never intended to be the asset, it was only a cost-token that fuelled the exchange of other issuers' tokens, similar to offline community exchange systems (CES). Ripple the company post-dates Ripple the project, which AFAIK was originally solidly non-commercial in motivation. I was part of the early commercialization of Ripple sort of by proxy while building Kraken, although I was opposed to the move. Aside from the money people, there were some good engineers involved with the right intentions, drawing from solid experience and with an awareness of CES and attempts at networking thereof.
The whole central banking thing was a post-facto marketing push as crypto went mainstream AFAIK. I believe some of the people changed at some point, but I didn't have time to focus on Ripple and never met them. I believe the Ripple narrative mirrors my overall experience with crypto: nice technical ideas by people with positive social visions, suddenly people get paid to do it, utopian visions rapidly replaced with money people, regulatory ingress effectively destroys the USP, whole thing turns in to a scam, regulations become warped in to a system of protectionism and government effectively in cahoots with the dominant players. A real education in human behavior.
No use ever, past, present and future for XRP and Ripple products... it is already flopping after spending a fortune and printing a huge amount of totally useless XRP. (Now the XRP army of Twitter trolls, bots, hired guns and zealots will attack again...)
OK, but you can find such quotes for everything. "We estimate the global demand to be about 3 computers" "nobody will need more than 16KB of memory" and so on.
afaik, Nouriel Roubini is a permabear. If your mental ML model predicts downfall all the time, you'd be right some time. Roubini has been bearish on stocks and BTC for a while now, which implies bullishness on USD, something I fail to understand given the rampant printing.
Interestingly enough, back in the day when ripple was first starting it was heavily promoted by the wall street crowd as being superior to bitcoin because it was "regulated". The logic was that ripple could better be incorporated into the traditional financial system because it would be easier to allow for know your customer and anti-money laundering compliance.
As someone who is a huge supporter of decentralized/unregulated crypto like BTC, I am just laughing my butt off watching the SEC rip ripple to pieces like this. Hope it shuts down.
It gained credit when google ventures invested in it back when it was open coin. I laughed at the thought of a competitor to bitcoin. Like what’s the point. But when Btc had its issues, I knew then I was wrong.
No surprise, Stellar was a pre-mined shix-coin, you have no idea how hard it was for me (Bitcoiner) at IBM listening to those imbeciles go on and on about the 'panacea' they were going to build with solidity (the worst most convoluted language I've ever encountered), hyperledger patchwork solutions and operating on ripple and stellar [0].
Those guys seriously had no idea what they were talking about 95% of the time, and despite being being one of the few that had both a Consultant with (at the time 8 years in Crytocurrency) and Developer roles prior to having my own fintech startup in Bitcoin for 4 years before that I was always the 'debbie downer' when I tried to explain the limitations of this technology and brought people back to Earth. Especially at the time as we were dealing with the war leading up to Segwit and Bcash hardfork and barely starting to make inroads with Lightning Network proofs of concept in the Bitcoin community. I'm glad I left when I did, but IBM had everything going for it in that space and despite that they still managed to cock things up because they're too blinded by their old contracting business model instead of actual innovation. They lost their vision a long time ago, and subsisting on Government and Military contracts is what probably made them this complacent.
In short, now after ~10 years in Crypto you'd be an idiot to deal with xrp and I don't feel bad for anyone that gets burned; I'd prefer it died without with no State intervention, but as some of you may know we've dealt with a lot of that in Bitcoin and only came out stronger while this may kill this project entirely. Just keep that in mind when you see why Bitcoin keeps defying every possible analyzer's projections and why even its main detractors (JP Morgan et al) have had to eat their weight in crow and are trying to get in after having ruined the banking Industry yet again with their largess and corrupt business model.
I’m anti-xrp but the smugness in your post is insufferable. Segwit has failed to reach even 50% adoption after all these years, future protocol upgrades are a decade away, and the lightning network is a centralized mess. Small blockers hijacked the network via block stream and ruined bitcoins scalability at the behest of their $400 mil investors. /r/Bitcoin is one of the most censored subreddits, ironic for a centralized platform. All you have now after years of stagnation is digital scarcity. Meanwhile ETH has shipped phase 0 of 2.0, is already 50% faster on 1.0, and is not slowing down any time soon. Your smug “we can/have done nothing wrong” attitude literally caused the BCH/BSV forks and have done nothing but hold crypto back.
Bitcoin still has serious environmental costs regardless of its use case. (Which for a currency the 7 TPS cap makes it a joke and as an asset has crazy volatility.)
Can someone clarify why XRP is considered a security by the SEC but bitcoin and ethereum are not? Is it something intrinsic in the tech, or is it just that XRP is "managed" by Ripple, a company, whereas BTC/ETH are not?
ETH was classified as a security, but the regulators declined to take action. It seems they feel like they have a better case for intent to deceive here.
Look like xrp is going to zero. lawyers from both sides will fight for years over the fate of the table scraps that remain. similar to Enron , in which the stock price went to zero in less than 3 months and the legal battle would ensure for over a decade about what to do with the little money that remained.
good. i'm amazed this didn't happen sooner. i have no idea how they can call eos and the dao a security offering and not xrp. xrp is one of the most obvious securities ever created.
[+] [-] davidwparker|5 years ago|reply
[+] [-] aazaa|5 years ago|reply
> The U.S. Supreme Court's Howey case and subsequent case law have found that an "investment contract" exists when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.[5] The so-called "Howey test" applies to any contract, scheme, or transaction, regardless of whether it has any of the characteristics of typical securities.[6] The focus of the Howey analysis is not only on the form and terms of the instrument itself (in this case, the digital asset) but also on the circumstances surrounding the digital asset and the manner in which it is offered, sold, or resold (which includes secondary market sales). Therefore, issuers and other persons and entities engaged in the marketing, offer, sale, resale, or distribution of any digital asset will need to analyze the relevant transactions to determine if the federal securities laws apply.
https://www.sec.gov/corpfin/framework-investment-contract-an...
Ripple (as distinct from the XRP token it created), currently holds a large block of uncirculated XRP created at the beginning of the network. This network does away with mining in favor of the Ripple Protocol Consensus Algorithm:
https://ripple.com/files/ripple_consensus_whitepaper.pdf
This protocol foregoes mining in favor of a system without proof-of-work. The tradeoff (or feature, depending on how you look at it) was that the distribution mechanism would involve Ripple itself giving away and selling XRP. This gave Ripple complete control of the money stock at the network's inception.
This is very different from how Bitcoin currency distribution works.
[+] [-] raiyu|5 years ago|reply
Bitcoin wasn’t sold by a company entity and xrp was.
[+] [-] OpticalWindows|5 years ago|reply
[+] [-] cwkoss|5 years ago|reply
I don't feel like there is much 'smart money' investing in XRP, so I think increased regulatory oversight is probably beneficial here.
[+] [-] modeless|5 years ago|reply
Will they go after Stellar next?
[+] [-] netik|5 years ago|reply
[+] [-] J0_k3r|5 years ago|reply
[+] [-] geraldbauer|5 years ago|reply
To quote Nouriel Roubini, Economist:
No use ever, past, present and future for XRP and Ripple products... it is already flopping after spending a fortune and printing a huge amount of totally useless XRP. (Now the XRP army of Twitter trolls, bots, hired guns and zealots will attack again...)
[+] [-] duxup|5 years ago|reply
[+] [-] sebmellen|5 years ago|reply
He gave a scathing talk criticizing cryptocurrencies and blockchains and all other things in the space. I shook his hand afterwards and told him that while I disagreed with some of his opinions, I really respected his conviction to give a talk to a room full of "crypto zealots" and stick to his opinions.
A very kind fellow in conversation, but he sure knows how to deliver bitter critique.
[+] [-] bravura|5 years ago|reply
"Imagine you go into a room of computer scientists and say: 'I've developed the most secure form of money possible, it's so secure you can't keep it on your computer and you have to dig a hole in your backyard and keep it there' you'd be laughed out of the room."
[+] [-] anm89|5 years ago|reply
Roubini sure called that one.
[+] [-] aazaa|5 years ago|reply
Unlike Bitcoin, which issues new currency units through mining, XRP is issued by Ripple. The case against Ripple appears to revolve around this point: is the XRP token a security?
[+] [-] bhaak|5 years ago|reply
[+] [-] PragmaticPulp|5 years ago|reply
The only things that matter are hype, and people buying/selling according to what people think other people are going to do.
Nearly every crypto-related story comes with narratives that it's good for the exchange rate for various reasons, but ultimately the price goes up (temporarily) because people expect other people to expect the price to go up and want to get ahead of it.
[+] [-] ArtWomb|5 years ago|reply
Looks like CrossTower has already de-listed XRP from its exchange. Incredible how fast information gets digested in crypto markets!
https://thecryptoreport.com/an-sec-victory-in-ripple-case-wo...
[+] [-] spottybanana|5 years ago|reply
To me the distinction is very clear and simple. However if I really needed money I still would probably issue an ICO and claim it is not a security because there is a big possibility that it will go unnoticed as SEC goes only after the bigger fish.
[+] [-] boh|5 years ago|reply
[+] [-] vmception|5 years ago|reply
But otherwise this document spells out everything that Ripple/XRP critics have been trying to drill into XRP Army conscripts for half a decade.
That Ripple is in the business of selling XRP and uses ambiguity between the context of “ripple” and deflection to say there are third parties using enough XRP to make it scarce in the future. When this was never happening, and to this day is not happening.
The complaint mentions a third party that paid to get XRP this year to use a Ripple Labs product. They bought the XRP from Ripple to the tune of $70mm and immediately sold it on the public markets.
I think the illusion is shattered with this complaint. But XRP should be able to retain its transfer usage, just back at 2013 price levels.
[+] [-] ehmmmmmmmm|5 years ago|reply
Not necessarily in support of Ripple specifically, but I do think having something that can actually challenge the SEC and reduce them to tears is a good thing. There are lots of things about the capital economy that could use change.
[+] [-] ur-whale|5 years ago|reply
[+] [-] ogogmad|5 years ago|reply
Is it supposed to be a faster Bitcoin? Is it supposed to be a less Chinese-controlled (supposedly) cryptocurrency than Bitcoin?
Let's for the sake of discussion give them the benefit of the doubt.
[+] [-] PragmaticPulp|5 years ago|reply
The pitch was that Ripple, the company, was going to sell XRP, the cryptocurrency, to the general public in order to fund all of their growth. Then, when banks ostensibly adopted XRP for their banking needs, the banks would be forced to pay exorbitant amounts of money to buy the artificially-scarce XRP from all of the speculators who got in early.
Everyone conveniently ignored the fact that large banks are not dumb, and they had no real reason to use a currency literally invented out of thin air to power their transactions. If banks really wanted to use cryptocurrency to trade among themselves, they'd obviously just roll their own cryptocurrency. Or they'd just copy-paste the permissively licensed Ripple code and call it something like BankCoin. No one could ever give me a good reason why banks would have no choice but to buy up arbitrary XRP from general public speculators.
[+] [-] momothereal|5 years ago|reply
To achieve that speed, banks transfer a digital currency (XRP) issued by Ripple instead of traditional currencies. It takes a few seconds for XRP transactions to settle, instead of days for traditional currencies via SWIFT.
The value of this currency is decentralized, in the sense that people trade it with other currencies (which is also how Bitcoin, Ethereum etc. are valued).
In the eyes of the SEC, the fact that XRP is directly issued by Ripple makes it similar to issuing shares. Even if Ripple doesn't control the value of the shares (XRP), they still manage the supply.
[+] [-] contingencies|5 years ago|reply
As I recall Ripple was originally a network-of-issuers for multiple issuer-specific tokens model, it wasn't supposed to be a single-issuer/single-token. The XRP token itself was never intended to be the asset, it was only a cost-token that fuelled the exchange of other issuers' tokens, similar to offline community exchange systems (CES). Ripple the company post-dates Ripple the project, which AFAIK was originally solidly non-commercial in motivation. I was part of the early commercialization of Ripple sort of by proxy while building Kraken, although I was opposed to the move. Aside from the money people, there were some good engineers involved with the right intentions, drawing from solid experience and with an awareness of CES and attempts at networking thereof.
The whole central banking thing was a post-facto marketing push as crypto went mainstream AFAIK. I believe some of the people changed at some point, but I didn't have time to focus on Ripple and never met them. I believe the Ripple narrative mirrors my overall experience with crypto: nice technical ideas by people with positive social visions, suddenly people get paid to do it, utopian visions rapidly replaced with money people, regulatory ingress effectively destroys the USP, whole thing turns in to a scam, regulations become warped in to a system of protectionism and government effectively in cahoots with the dominant players. A real education in human behavior.
[+] [-] ur-whale|5 years ago|reply
[+] [-] geraldbauer|5 years ago|reply
To quote Nouriel Roubini, Economist:
No use ever, past, present and future for XRP and Ripple products... it is already flopping after spending a fortune and printing a huge amount of totally useless XRP. (Now the XRP army of Twitter trolls, bots, hired guns and zealots will attack again...)
[+] [-] vrperson|5 years ago|reply
(I'm not a fan of XRP, anyways)
[+] [-] silentsea90|5 years ago|reply
[+] [-] scottmcleod|5 years ago|reply
[+] [-] newguy1234|5 years ago|reply
As someone who is a huge supporter of decentralized/unregulated crypto like BTC, I am just laughing my butt off watching the SEC rip ripple to pieces like this. Hope it shuts down.
[+] [-] nashashmi|5 years ago|reply
[+] [-] paulpauper|5 years ago|reply
[+] [-] Melting_Harps|5 years ago|reply
Those guys seriously had no idea what they were talking about 95% of the time, and despite being being one of the few that had both a Consultant with (at the time 8 years in Crytocurrency) and Developer roles prior to having my own fintech startup in Bitcoin for 4 years before that I was always the 'debbie downer' when I tried to explain the limitations of this technology and brought people back to Earth. Especially at the time as we were dealing with the war leading up to Segwit and Bcash hardfork and barely starting to make inroads with Lightning Network proofs of concept in the Bitcoin community. I'm glad I left when I did, but IBM had everything going for it in that space and despite that they still managed to cock things up because they're too blinded by their old contracting business model instead of actual innovation. They lost their vision a long time ago, and subsisting on Government and Military contracts is what probably made them this complacent.
In short, now after ~10 years in Crypto you'd be an idiot to deal with xrp and I don't feel bad for anyone that gets burned; I'd prefer it died without with no State intervention, but as some of you may know we've dealt with a lot of that in Bitcoin and only came out stronger while this may kill this project entirely. Just keep that in mind when you see why Bitcoin keeps defying every possible analyzer's projections and why even its main detractors (JP Morgan et al) have had to eat their weight in crow and are trying to get in after having ruined the banking Industry yet again with their largess and corrupt business model.
0: https://thexrpdaily.com/2019/01/27/stellar-partner-ibm-confi...
[+] [-] zionic|5 years ago|reply
[+] [-] LittlePeter|5 years ago|reply
It does not. Several people claimed Bitcoin would be in the $100K-$1,000K range by now.
[+] [-] paulryanrogers|5 years ago|reply
[+] [-] cblconfederate|5 years ago|reply
[+] [-] shrimpx|5 years ago|reply
[+] [-] xalava|5 years ago|reply
The SEC does not considers Bitcoin a security, as it's "decentralised enough". Nobody is running Bitcoin alone, selling them alone...
The Ethereum sale was probably a security offering, but it is now "decentralised enough" too for the same reasons.
[+] [-] __s|5 years ago|reply
> Unlike Bitcoin, which issues new currency units through mining, XRP is issued by Ripple
Nobody can "print money" with bitcoin. That isn't the case with Ripple
[+] [-] garmaine|5 years ago|reply
[+] [-] paulpauper|5 years ago|reply
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] risho|5 years ago|reply
[+] [-] Mtinie|5 years ago|reply
https://news.ycombinator.com/item?id=25510979
[+] [-] CryptoPunk|5 years ago|reply
[+] [-] HashBasher|5 years ago|reply
[+] [-] uptown|5 years ago|reply
http://arringtonxrpcapital.com/2017/11/28/announcing-arringt...