Ever since the release of Ripple (XRP) in the year 2012 by Chris Larsen and Bran Garlinghouse, there is no doubt that it is facing its darkest moment. Just as other coins seem to be gaining ground in the cryptocurrency market, Ripple is doing the opposite. For instance, within a period of 7 days, it has lost almost 40% of its value which is quite alarming. This is a result of the lawsuit filed against it by the US Securities and Exchange Commission (SEC).
Could this really be the end of Ripple’s dominance? Does the future look bleak for this cryptocurrency? The truth is that there are lots of question marks around ripple at the moment. Some experts are beginning to ask whether it can compete favorably with other cryptocurrencies in the market over the years given how its value has deflated within such a short space of time.
We will be discussing how events have unfolded in the last couple of days thereby leading to its reduced value. You will also find out what the future holds for this cryptocurrency according to analyses from cryptocurrency experts.
Where it all went wrong?
Reports claimed that the SEC decided to file a lawsuit against Ripple. According to SEC, Ripple isn’t a currency but a security. Therefore, it ought to have been registered as a security in 2012 when it first got launched. At the moment, Ripple is valued at around $10billion with its most recent funding round contributing about $200million. It is also no secret that a major part of the coins market capitalization (55%) is held by Ripple at the moment.
In response to such allegations, Ripple claimed the statements of SEC is not correct. It pointed out that XRP is a tool that has been designed to be used by financial institutions. Brad Garlinghouse, one of Rippple’s leaders had claimed that these accusations of SEC doesn’t hold water. Therefore, they lacked any proof to support such a claim. He further explained that Ripple’s existence and activities in the cryptocurrency world has all the required legal backing.
At the moment, XPR can be exchanged for around $0.29. This simply means that on a daily basis, it is reducing by a whopping 6%. Amongst other cryptocurrencies, it has been relegated to position number 4 with a market capitalization value of around $13.2billion including an average trade volume of about $9.5million.
The source of the problem
According to the SEC, Ripple was discovered to have raised funds via digital asset sales in unregistered security offering starting from 2013 to US investors. Furthermore, billions of XRP were allegedly distributed. These were exchanged for non-cash consideration. There were also claims of around 600million XRP (unregistered) being sold by Larsen and Garlinghouse in the past for the purpose of raising funds.
According to Garlinghouse, the Justice Department as well as the Treasury’s FinCEN consider XRP to be a virtual currency instead of a security. He explained that apart from G20 regulators having similar views, there is no country in the world which sees XRP as a security. The major question most people are beginning to ask is why has the Security Exchange Commission allowed XRP to function as currency since 2012.
Even the timing of such a lawsuit has been questioned since Jay Clayton, chairman of SEC will soon be stepping down. It definitely has been a case of accusations and counter-accusations over the last 7days as leaders of Ripple are trying to see reasons why the SEC shouldn’t interfere with their activities.
Are cryptocurrency companies going to be affected?
Given the fact that XRP’s activities are being questioned at the moment, there is no doubt that some major companies have been affected. This section will be discussing such brands including decisions that have been reached by their respective management boards.
The first of such companies is MoneyGram which is a reputable brand amongst others in money transfer. Due to the series of events that XRP is experiencing (caused by the lawsuit), MoneyGram reached a decision to reveal its partnership with the company (Ripple). Of course, Ripple has worked very hard to gain support from banks and other financial bodies since coming into existence with MoneyGram being one of such.
However, all of these seem to be heading towards the rock as the company has suffered a major setback. A proof of this is the statement released on the 23rd of Dec explaining that it has never made use of Ripple Net during its forex transactions. It also went further to claim it hadn’t played any role in the actions of the SEC.
While MoneyGram has been quick to deny ever partnering with Ripple and its currency, past records are indicating the opposite. For instance, it was reported MoneyGram adopted the ODL of Ripple in about 5 payment corridors around the globe. This adoption was further confirmed by Asheesh Birla, one of the members of the product management team of Ripple. Of course, there are reports also claiming Ripple has about 30% stake in MoneyGram which is quite huge.
Bitstamp is another reputable company which decided to put some restrictions on the activities of US customers who plan exchanging XRP. This is in response to the allegations that have been filed against Ripple by the Securities Exchange Commission. According to the company management, this restriction is expected to commence from on the 8th of January 2021. It should be noted that withdrawals will not be affected as customers from the US can also affect such a process. However, they will not be able to trade or deposit once the restriction begins.
While Bitstamp has been quick to state clearly that customers will be updated on the situation, it refused to specify when such restrictions would be removed for US customers. According to experts, one of the reasons why Bitstamp has decided to take such a stance is the fear of experiencing unimaginable losses. This isn’t further from the truth given how the value of XRP has fallen over the past few days.
They are also worried about the legal actions taken against Ripple which can also affect their existence. It doesn’t sound like a bad decision with all the uncertainties surrounding the future of XRP at the moment.
There are more implications of this lawsuit. Apart from the two companies mentioned above, there are other platforms which are currently making plans of having XRP delisted. These include OTC desks, market makers, payment processors and cryptocurrency exchangers.
What’s next for Ripple?
Given how Ripple’s XRP value has been negatively affected by the lawsuit from the Securities and Exchange Commission, there are reports claiming it has started making plans to relocate from the US. This is no surprise given that the US regulations lack clarity. A decision like this is inevitable given the devastating effect such claims have had on the activities of Ripple. Due to the clear taxonomy that the UK has been known for, there are suggestions that Ripple may move its headquarters to such a location. This was even further buttressed when Garlinghouse explained that the firm would benefit immensely from how the UK system has been structured.
Ripple’s potential abroad relocation is becoming obvious by the day given how Garlinghouse claimed the lawsuit was expected to be filed before the end of 2020. Apart from the UK, there are other locations which are also being considered as possible destinations to operate from. These are countries like the United Arab Emirates, Japan, Singapore, and Switzerland. Given the fact that co-founder, Chris Larsen has also supported such a statement, there is every reason to believe that Ripple has very little time to operate from the US as its headquarters. There are too many uncertainties about XRP at the moment.
As of 28th of December, reports are claiming that the reduction in XRP value is around 38%. There are reasons to believe it may not be able to recover from this great slump. However, with plans on ground to relocate its headquarters to any of the above stated locations, there is hope for future investors. Experts have mixed opinions about where the future of Ripple is currently heading at the moment. For instance, there are those who believe that XRP has lost its position to other cryptocurrencies and may not be able to recover again due to this lawsuit from the Securities and Exchange Commission. On the other hand, there are those who believe that the company can bounce back through some strategic planning.
Having said the above, it is obvious that XRP is indeed going through one of its most difficult times when even experts can’t make accurate predictions about its future position in the cryptocurrency market. The next couple of months ahead will be very interesting as investors and experts are very keen to know the next step Ripple will be taking.