Why Ripple Is Not A Security

William Hinman, who is the Director of the SEC’s Division of Corporate Finance has clarified that Ethereum is not a security. This has been a long standing discussion, as to whether XRP is, or is not a security as well. Ethereum World News, has put the points forward that suggest that neither Ethereum or XRP are securities, based on the fact that they are both decentralised. Ripple has recently released Rippled v1.0.0 and the recent amendments of this usher into a completely new era of decentralisation for the ledger. This means that for every two non-Ripple validators of the network that are added, Ripple will actually remove one of its own. Brad Garlinghouse has also stated that XRP is completely separated from the company that it is associated with, Ripple. Back in April, David Schwartz, the Chief Cryptographer at Ripple has stated that XRP was actually given to the Ripple company. Although XRP was first created in 2004, the current version was only made available in 2012. This was the same year that Chris Larsen, who created XRP also created Ripple Labs, although it was known as OpenCoin then. 100 Billion XRP was issued to run on the protocol, which is now known as the Ripple Network, so this statement is correct, and XRP is used as a utility coin to facilitate liquidity in the Ripple network. According to the SEC, there have been several experts who have claimed that existing framework cannot offer guidelines to regulate XRP. Back in 2014, it was stated that there is no framework to regulate cryptocurrencies, with the former Federal Reserve Chairwoman, Janet Yellen saying;

“The Fed doesn’t really play any regulatory role with respect to Bitcoin, other than assuring that banking organisations that we do supervise are attentive, that they are appropriately managing any interactions they have with participants in that market, and appropriately monitoring anti-money laundering, bank secrecy act responsibilities that they have.”

Finally, back in 2015, FinCEN gave Ripple the go ahead to continue with sales in XRP, making it a federal entity. In a reported issued by FinCEN, it states that there was an agreement that was signed by both FinCEN and Ripple that acknowledged that digital currency providers have an obligation to refrain from illegal activity as well as ensuring that they are not profiting by creating products that all criminals to avoid detection. However, if the SEC states that XRP is in fact a security, the agreement will come under scrutiny.