Regulators around the world have been trying to reign in cryptocurrencies. While cryptocurrencies are known for their decentralized nature, regulators and government bodies want to prove otherwise. This judgment was further strengthened by the fall of FTX in 2022.
The collapse of the exchange awakened regulators. They eagerly brought up the necessity to regulate cryptocurrencies to avoid another FTX-like instance. Perhaps the decision of a prolonged lawsuit that dates back to 2020, which is questioning whether a digital token should be considered a security, would then provide control to the Securities and Exchange Commission if they came out on top.
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Yes, we’re talking about the Ripple vs. SEC lawsuit, which could be resolved in the first half of 2023. What could happen if the SEC proves to be victorious in this case? What would be the future of cryptocurrencies? Let us find out.
Ripple vs. SEC battle dates back to 2020
The whole battle dates back to December 2020 when the SEC sued Ripple, stating that XRP is a security. Ripple is a prominent altcoin that is ranked no. six in terms of global market cap.
The case has been dragging on. It is unclear at the moment who is going to come out as the winner. But, one thing that is clear is that the SEC is going to cite the fleet of events that happened in 2022, including the fall of the FTX and how it affected millions of customers and caused billions in losses.
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Several analysts also speak about this point that can act as an influence on the judges. The SEC will try to make the court understand that if the decision comes out in favor of Ripple, more FTX-like instances can arise.
The lawsuit is still ongoing…
In the ongoing lawsuit, Ripple also backed the fact that XRP is not a security, that the sales took place in the secondary market, and there was no pooling of profits.
“Selling an asset on a secondary market is most akin to a commodity, and should be regulated as such. You don’t lose consumer protection and you keep bad actors out. Regulation needs to be done in a way that respects the reality of what an asset is,” Ripple’s general counsel, Stuart Alderoty, said in an interview.
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But, in a situation where the judge rules XRP as security, it would not only affect Ripple, but it would have a devastating effect on other coins in the market. The SEC had also recently sued Genesis Global capital and Gemini for raising billions of dollars. A recent LBRY case also concluded that their specific digital currency is a security.
If Ripple succeeds, it will be good news for the cryptocurrency community; if it fails, the SEC will begin to exert greater control and scrutiny over other cryptocurrencies. This could also eliminate the freedom afforded by the absence of a monopoly in the cryptocurrency realm.