Still Confused About Ripple And The SEC? We Break It Down For You

Ripple (XRP) has been under legal fire from the SEC since 2020 over whether its XRP token is a “security.” The case revolves around U.S. securities laws and how Ripple sold XRP. In 2023, the court partially ruled XRP is not a security when traded on exchanges, but it can be when sold to institutional investors. The lawsuit isn’t fully over, but Ripple got a major win.

Excerpt of Still Confused About Ripple And The SEC? We Break It Down For You

The U.S. Securities and Exchange Commission (SEC) sued Ripple Labs in December 2020, alleging that it raised $1.3 billion by selling XRP as an unregistered security. Ripple argued that XRP is not a security, and that it operates as a currency. After years of legal back-and-forth, in July 2023, a U.S. judge ruled that XRP is not a security when sold on exchanges — a major win for Ripple. However, sales to institutional investors were found to be securities. This partial victory has reshaped crypto regulation debates and given hope to many in the crypto space. But the legal battle isn’t completely over, as remedies and final rulings are still pending.

Ripple, the cryptocurrency that has been making waves for the past few years, has built partnerships with more than 300 financial institutions and bolstered tremendous community faith, all while navigating significant legal challenges. This is what we are here to explore. Beneath the headlines and courtroom drama lies a deeper story, one of ambition, resistance, and a question few dare to ask out loud: What if this was never just about Ripple? What if the lawsuit was merely the surface of a larger undercurrent, a quiet power struggle where control has been finally pissed off by innovation? Maybe it is a way where Ripple just happened to be the first to step out of line. Why Ripple? Why in 2020? Why, despite everything, does it continue to move forward?

The answers aren’t straightforward, as it is the process one goes through after deciding they are interested in how to buy XRP. And maybe, it is not even meant to be. By the end of this article, however, you might begin to see the bigger picture, or, at least, question the one you thought you understood.

A Brief Background On Ripple And XRP

The only expectation Chris Larsen and Jed McCaleb had when they founded Ripple in 2012 was to revolutionize global payments, focusing on bridging the gap between the world of mainstream finance and digital assets. Although Ripple is not like the typical fully decentralized blockchain we’ve all got used to, and uses a one-of-a-kind consensus algorithm where a network of bank-controlled servers is in charge of validating transactions, it still maintains a modest level of decentralization, empowering several trusted validators, proclaimed by the common vote of the community, to proclaim transactions.

If we were to define Ripple’s real turning point, then we’d have to go back to 2014, when the digital payment network partnered with Germany’s Fidor Bank, an institution that, in fact, was the first big banking enterprise Ripple partnered with. The reason why we call this occurrence “the real turning point” is that from there, it wasn’t long before Ripple started to show what it was truly capable of, proving tremendous potential in shaking up the traditional manner in which cross-border payments were executed. As one might naturally expect, more deals followed, with relevant names such as Santander and American Express joining the movement.

Ripple Net and XRP played a crucial role in this strategy, streamlining the performance of cross-border payments, facilitating liquidity, and eliminating the need for pre-funded accounts in multiple currencies. Other key moments of this, if we may call it, financial revolution include:

• By 2017, XRP’s value had skyrocketed, and for a short time, it became the world’s second-largest cryptocurrency, with a market capitalization exceeding $120 billion.
• As Ripple has never claimed even for just one second that it is interested in forming partnerships with banks exclusively, it was not long until it set its sights on the global remittance market. In 2019, the company partnered with MoneyGram, one of the leading names in money transfers, investing $50 million into the firm.
• Nevertheless, by 2020, Ripple had established partnerships with more than 300 financial institutions across over 40 countries, facilitating the processing of billions of dollars in payments.

The SEC Targets Ripple

It is not as if regulating cryptocurrency in the US has ever been an easy task, particularly considering that the very essence of crypto , decentralized, fluid, and borderless, defies the rigid boxes traditional finance tries to place it in. Even though Ripple had the audacity to test how far the system would bend before it decides to bite back. Now, if we were to define this specific moment in the story, then December 2020 would mark the point where ambition met regulation head-on.  The SEC filed a lawsuit against Ripple Labs, its co-founder, and CEO, accusing them of raising $1.3 billion through the sale of XRP, which the SEC claimed was an unregistered security.

The argument was, on the surface, simple, or at least it seemed so. According to the SEC, buying XRP wasn’t just a purchase; it was an investment in Ripple’s success, a promise of profit derived from someone else’s effort. And if we were to follow that logic, XRP wasn’t a currency at all, but a security, one that had slipped through the cracks of federal law.

But the story didn’t end there. In fact, it was only just beginning.

Ripple In The Context Of Other SEC Crackdowns

To understand Ripple’s situation, we have to look beyond it. This wasn’t the SEC’s first dance with crypto. It had already flexed its authority in previous battles, each one setting the stage for what would later unfold. Take Telegram’s TON (Telegram Open Network), for instance. In 2019, the SEC accused Telegram of raising $1.7 billion through the sale of its GRAM token, which was allegedly a security that had not been registered. The result? A forced shutdown, and billions refunded to investors. Or Block.one, the company behind EOS, which had to part with $24 million after raising $4 billion through an initial coin offering that failed to meet the SEC’s standards. If we were to connect the dots, a pattern begins to emerge. Each case was more than a lawsuit; it was a statement of principle. The SEC wasn’t merely enforcing rules but drawing lines in the sand, defining who got to innovate and how far they could go before being called back to heel.

For Ripple, this wasn’t just a legal battle. It was a question of identity, not only for the company, but for the entire cryptocurrency world. However, against all odds, it endured, finding stability, sustained by faith, purpose, and the quiet conviction that history tends to favor those who persist.