- XRP is Not a Security According to Christopher Giancarlo, the CFTC Chairman
- XRP Fails the Howey Test And its security Status is Finally Declared by a Respectable Regulator
Ripple News Today – The XRP security status has finally been declared by the chairperson of the Commodity Futures Trading Commission (CFTC). After subjecting the XRP token to the Howey Test, Giancarlo and his colleague Conrad Bahlke made their declaration in an op-ed yesterday. Giancarlo’s statement was published by the International Financial Law Review (IFLR) and it had given Ripple XRP the much needed good news. The primary topic of discussion in the piece was Ripple and its XRP token. However, the most interesting takeaway point was XRP security status.
Ripple News Today – Ripple XRP is Not a Security, Ripple Community Rejoices
If XRP is not a security, what is it? The statement revealed that XRP is more of a currency or a medium of exchange than a security. Giancarlo made reference to the comment the United States SEC made some time ago. Shortly after the 2017/2018 Bitcoin bull run, the SEC said that Bitcoin and Ethereum are not securities. However, they didn’t say anything about the Ripple XRP token. The cryptocurrency community has been uneasy since then and many people refused to buy or trade XRP for fear of facing charges for dealing with unregistered securities. Giancarlo and Conrad Bahlkesaid
“Much like bitcoin and ether, XRP is a digital currency supported by a distributed ledger that uses cryptography to store and transfer assets. However, XRP and the underlying XRP Ledger were designed in 2011 and 2012 specifically as a payment mechanism by software developers who later founded Ripple Labs (Ripple). Ripple today utilizes XRP to address liquidity challenges faced by financial institutions, including high transaction fees, long processing times, and the need for third-party monitoring interposed by traditional clearinghouses and settlement mechanisms.”
There is a popular school of thought that XRP is not as good as Bitcoin and Ethereum because it is not mined. Giancarlo and Bahlke addressed this issue stating that not being mines doesn’t make XRP a security and it does not change how the token should be used. In their words;
“In the absence of mining, XRP cannot be generated by third parties. Instead, a finite supply of XRP (100 billion units) was created at the time of inception, slightly more than 50% of which is currently held in escrow by Ripple and sold periodically. While these differences enable XRP to better serve its intended purpose as a liquidity tool and settlement mechanism, they do not fundamentally set XRP apart from its peers from a legal and regulatory perspective.”
Ripple News Today – XRP Fails the Howey Test
The Howey Test has been used to determine if an asset should be regulated under security laws or not. Giancarlo and Bahlke say that Ripple XRP doesn’t pass the Howey Test and so it isn’t a security. “The mere fact that an individual holds XRP does not create any relationship, rights, or privileges with respect to Ripple.” They said.