- The SEC’s claim that Ripple’s XRP lacks intrinsic value has sparked intense debate and scrutiny within the cryptocurrency community.
- Questions are being raised about the SEC’s consistency, especially when other cryptocurrencies like Ethereum have been seemingly given a different treatment.
Dissecting the SEC’s Paradoxical Posture
The recent assertion by the U.S. Securities and Exchange Commission (SEC) that XRP, Ripple’s digital asset, has no intrinsic value has set the cryptocurrency community ablaze with debate. This claim was part of a motion presented to Judge Torres and immediately raised eyebrows, particularly considering the SEC’s seemingly differential approach towards other prominent digital assets like Ethereum.
Here’s the point to consider: on June 13, 2018 Clayton and Hinman receive the #XRP Howey Memo 📝, written by SEC enforcement lawyers. The Memo does not conclude by making any recommendations of any nature. It certainly does not recommend an enforcement action against @Ripple… https://t.co/RaGsGl1MOX
— John E Deaton (@JohnEDeaton1) August 28, 2023
The inconsistency of the SEC’s argument becomes starkly apparent when one juxtaposes it against the well-established Howey Test. This legal metric is used to determine if an asset is a security, based on criteria such as
“investment of money in a common enterprise with profits derived solely from the efforts of others.”
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According to the Howey Test, the intrinsic value—or lack thereof—of the asset is irrelevant to its classification as a security.
In Ripple’s Summary Judgment (SJ) motion, the SEC didn’t contest the importance of the Howey Test. Yet, it counterintuitively maintained its stance on XRP lacking intrinsic value while seeking permission to file an interlocutory appeal.
A Double Standard?
This discord has led to rampant speculation about potential preferential treatment by the SEC. Why is the SEC willing to differentiate between XRP and other digital assets or commodities that are assumed to have intrinsic value? One prevailing theory posits that the SEC may be in the process of carving out a unique legal niche exclusively for digital assets, setting them apart from conventional commodities and financial instruments.
The potential ramifications of the SEC’s argument are colossal for the broader crypto industry. If the SEC wins its case, claiming that XRP lacks intrinsic value, it could set a precedent that drastically alters the regulatory schema governing other digital assets.
While Ripple’s CEO and CTO sought clarity from the SEC in a private meeting regarding XRP’s exclusion from the regulatory free passes given to Bitcoin and Ethereum, the regulatory body remained ambiguous. This ambivalence has incited a sense of urgency among crypto enthusiasts and stakeholders to better understand the regulatory trajectory for digital assets like XRP. After all, the case’s outcome could metamorphosize the landscape of cryptocurrency regulation altogether.
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