As we foresaw, XRP has returned to fourth place in terms of capitalization after its price dropped dramatically. The reason for the collapse is not in some shortcomings of the popular cryptocurrency but in a lawsuit from the SEC (US Securities and Exchange Commission).
Ripple Labs has been seeking recognition in the American market for the legal use of its services in fintech solutions for several years. However, a powerful banking lobby blocks all these attempts. The reason is that Ripple offers efficient and cheap solutions for cross-border transfers without the involvement of the banking system. Bankers in the United States have unlimited influence over authorities, that’s why the innovative solution of the cryptocurrency platform is making its way to users so hardly. Until recently, however, Ripple still managed to enter into partnerships with financial companies, mainly outside the United States.
Throughout 2020, XRP began to be in high demand on the central bank digital currencies (CBDC) hype. Its price by the end of November increased almost 4 times since the beginning of the year, from $0.193 to $0.78. And if to count from March, when the market dropped due to coronavirus, then the growth was more than 510%. The fact is that the Ripple platform turned out to be the optimal solution for launching CBDC. If the trend for digital currencies of central banks continues, they become a threat to the financial hegemony of the United States. Therefore, the SEC has taken a number of tough measures against Ripple.
First of all, it was stated that XRP is not recognized as a cryptocurrency and is considered a security that requires a license to operate. After that Ripple announced that company leaders thought about changing jurisdictions. And now the SEC struck again. According to Ripple Labs CEO Brad Garlinghouse, the SEC is preparing a lawsuit against him and co-founder Chris Larsen on charges of selling $1.3 billion in unregistered securities, referring to transactions with the XRP token. The charge states:
– Ripple raised funds, beginning in 2013, through the sale of digital assets known as XRP in an unregistered securities offering to investors in the US and worldwide. Ripple also allegedly distributed billions of XRP in exchange for non-cash consideration, such as labor and market-making services. According to the complaint, in addition to structuring and promoting the XRP sales used to finance the company’s business, Larsen and Garlinghouse also affected personal unregistered sales of XRP totaling approximately $600 million.
In fact, a ruinous lawsuit means a ban on XRP transactions in the US. On this news, XRP has already dropped 2.5 times and continues to fall.