TL;DR Breakdown:
- The US SEC has filed its lawsuit against XRP for issuing unregistered securities to investors.
- Crypto exchanges are beginning to delist XRP for trading on their platform.
As Brad Garlinghouse, the CEO of Ripple, the blockchain company behind the third-largest digital currency (XRP), hinted on Tuesday, the company was charged by the US Securities and Exchange Commission (SEC) in a lawsuit later that day. The outcome of development already isn’t looking for the cryptocurrency in particular, as a few crypto exchanges have discontinued XRP trading support.
Many people speculate that more exchanges are likely to follow suit, which will eventually affect the liquidity of the popularly-traded coin. Could this be a bye for Ripple (XRP)?
SEC lawsuit against Ripple
The United States regulator asserted in the lawsuit filed on Tuesday that the blockchain company conducted the sale of a security (XRP) to investors without any registration. The CEO and Chris Larsen, the former chief executive of Ripple, were also named in the lawsuit as defendants. The SEC argued that both Ripple executives knew that the cryptocurrency had a little use case, yet proceeded with selling the crypto for their enrichment.
Ripple says that XRP was developed to enable the streamlined transfer of funds globally for financial institutions, including banks. However, the US regulator claimed otherwise, arguing that it was even more expensive for these institutions to use XRP than other alternatives. The SEC also asserted that the company paid some institutions to continue using XRP for money transfers. While the development unfolds, the outcome so far is already looking bad for XRP performance.
Why crypto exchanges delisting XRP isn’t good
CrossTower is reportedly the first crypto exchange to delist XRP on its platform, followed by Beaxy exchange, although, it said the customers can still withdrawal XRP from their platform until further notice. By offering XRP which SEC says is security, many crypto exchanges might be asked to apply as securities exchanges or face the penalties for offering them to retails – that’s if the SEC wins the suit. So, many crypto exchanges are likely to delist XRP as time proceeds.
“Many cryptocurrency exchanges would be forced to delist it, so liquidity would dry up,” said Messari’s Ryan Watkins. When this happens, the XRP will take a price hit.
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