About nine years ago, Ripple Labs was launched that promised to offer low-cost and fast clearance to trans-border money transfers to financial institutions. In order to make this happen, they set up a network that sped up transactions across the globe through XRP, a cryptocurrency that was created specifically for this task. However, since XRP became quite popular outside of this application, it became a time bomb for Ripple. The bomb went off last year after the SEC filed a suit against the company and its CEO. The SEC claimed that XRP was unregistered security which made it an illegal IPO.
The case is being dragged on and it doesn’t seem like there would be a clear resolution for this anytime soon. The legal woes of Ripple have led it to become a symbol of the regulations that are enveloping digital currency. This reflects the mismatch of the laws that were developed during the time of the Great Depression and doesn’t represent the burgeoning fintech ecosystem of today.
Even though there are different opinions on whether there is a strong case against the company or not, there is one thing that everyone agrees on. The underlying problem is that there isn’t clarity on how the cryptocurrency should be regulated in a way that doesn’t sabotage the industry or target investors and companies unfairly as they didn’t have a lot of knowledge about how they have been running afoul of the regulators.
A University of Arkansas School of Law, Carol Goforth, studies cryptocurrency and believes that this new asset class was launched about over a decade ago. However, we haven’t yet started to focus on creating regulations that are specifically targeted to it. The cryptocurrency investors have been watching this case closely as its result could decide the future of this industry.