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January 7, 2021 - Ripple's XRP is fighting for survival after the recent SEC's charges against Ripple Labs Inc. announced on December 22, 2020 as it faces being delisted by a critical mass of exchanges, and therefore ending XRP’s hopes for mainstream adoption.
The digital asset's market cap reached its 2020 peak towards the end of November, touching $36 billion. (Its all-time high was $128.5 billion on January 1, 2018.) The rally in XRP’s price was partly based on the anticipated Spark Airdrop cryptocurrency giveaway to holders of XRP on December 12, and perhaps partly because of speculation that Ripple was looking to capitalise on central banks’ push to digitalise their currencies.
The day after the news of the SEC charges came out, crypto exchanges started to delist XRP so as to avoid any legal issues, with OSL, CrossTower and Beaxy among the first to do so only hours after the SEC announcement. The market cap of XRP then lost approximately 72% of its value, slipping from $0.65 down to $0.18 in less than two weeks, with its market cap touching a low of $7.2 billion on December 29, with Tether replacing XRP as the third-largest cryptocurrency by market-cap.
XRP Historical Market Cap: Trading View
The SEC charges against Ripple Labs Inc. allege that they, “raised over $1.3 billion through an unregistered, ongoing digital asset securities offering”. The basis of the SEC’s charges were made in a public release on the SEC’s website on December 22:
“According to the SEC's complaint, Ripple; Christian Larsen, the company's co-founder, executive chairman of its board, and former CEO; and Bradley Garlinghouse, the company's current CEO, raised capital to finance the company's business. The complaint alleges that Ripple raised funds, beginning in 2013, through the sale of digital assets known as XRP in an unregistered securities offering to investors in the U.S. 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 effected personal unregistered sales of XRP totaling approximately $600 million. The complaint alleges that the defendants failed to register their offers and sales of XRP or satisfy any exemption from registration, in violation of the registration provisions of the federal securities laws.” In other words, per the Securities Act of 1933, any offer that involves funds being raised for a company must be registered as a security and the SEC charges Ripple and its senior management of violating the registration provisions of the Act and not registering XRP as a security.
The impact of the charges escalated quickly, with several cryptocurrency exchanges dumping the digital asset off their list of tradable assets. In December, one of the major cryptocurrency exchanges, Coinbase, announced it would suspend XRP trading on its platform. The pre-determined final date for their decision is reportedly January 19, 2021. Coinbase said that regardless of the harsh measures, the trading suspension of XRP pairs will not affect customers' access to their XRP wallets.
Reportedly XRP would remain available for deposit and withdrawal after the planned trading suspension. Moreover, customers will be able to participate in the previously announced Spark airdrop (subject to approval in certain jurisdictions). The company said it would continue the XRP support on Coinbase Custody and Coinbase Wallet.
Adding to the persona-non-grata status was the removal by Grayscale of XRP from its Grayscale Digital Large Cap Fund earlier this week on January 5, 2021.
By the end of December, the list of exchanges delisting XRP grew and consisted of - as per Yahoo Finance:
• Beaxy – Suspended trading until further notice. Withdrawals will remain enabled until
further notice.
• Binance – Delist on 13th January.
• Bitstamp – Suspend on 8th January.
• Bittrex – Removal on 15th January 2021.
• Bitwise – Liquidated its XRP position under its own crypto index fund.
• B2C2 – Suspended trading until further notice.
• Coinbase – suspension to begin on 19th January 2021.
• Crosstower – Suspended trading until further notice.
• Crypto.com – suspension to begin 19th January 2021.
• Galaxy Digital – Suspended trading until further notice.
• Genesis – Suspension to begin 15th January 2021.
• Jump Trading – Suspended trading until further notice.
• OKCoin – Suspension to begin on 4th January.
• OSL – Suspended trading until further notice.
• Simplex – Simplex partners have blocked the purchase of Ripple’s XRP with Simplex
integration. These partners include but are not limited, to Binance,
Huobi, KuCoin, and BitPay.
• Swipe Wallet – Delisting for U.S customers on 5th January.
• Wirex – Exclude Ripple’s XRP.
• Ziglu – suspension to begin on 12th January 2021.
Blockchain.com also plans to suspend XRP trading from its list on January 14. The official report promises platform's users who have XRP balances that they will keep receiving support and access to their XRP assets to send after the halt of trading. Still, the network will not support receiving any further XRP in the Exchange anymore.
As of the time of writing, the **Institutional Crypto Exchange LMAX Digital is continuing to offer trading and liquidity in XRP. **
As a result of the regulator's charges against Ripple and the threat they pose to the future of XRP, as a digital currency, a “We The People” petition was raised asking the federal government in the U.S. to consider XRP as a currency and not security, as stated in the SEC's official complaint. The petition states:
The Securities and Exchange Commission is tasked to protect investors in US Securities. It however, has filed frivolous action claiming the cryptocurrency, XRP, which has already been deemed a currency by FinCEN, to be a security. Due to this action, the 40 billion dollar market for the currency is rapidly failing as companies scramble to maintain compliance. Billions of dollars of value is being wiped from the market in rapid succession and most critically, hundreds of thousands of ordinary Americans - the very Americans that the SEC is tasked to protect - are suffering irreparable harm and damages.
The SEC complaint is damaging to the holders of the currency XRP, and must cease immediately. The US Government has clearly given guidance, as established by FinCEN, that XRP is a currency.
At the time of writing, 37,549 signatures were added to the petition. To generate a response from the White House, 62,451 signatures are required by January 28, 2021. Even if the petition does garner a response from the Joe Biden White House, it would seem naive to think that the White House will make a decision favourable to Ripple; it is far more likely to defer back to the SEC.
Also at the time of writing, XRP seems to be having a new lease of life, trading near $0.35, nearly a 50% gain in 24 hours, with a market cap of $33.88 billion. This move could be based on a letter published by the Office of the Comptroller of the Currency in the US (OCC) that states that federally regulated banks in the US can use stablecoins to conduct payments and other activities.
It seems that Ripple are going to have to resolve the charges brought against them by the SEC before XRP will be relisted on the various exchanges listed above, and before liquidity and a brighter future returns. Everything hinges on how tough the SEC will be. If there is a financial penalty, it would have to be large enough to put Ripple out of business if XRP's future were really to be threatened with termination. If Ripple were unable to sell more XRP to fund any penalty, then Ripple and XRP could be in terminal trouble. Therefore the real question is, how large will the financial penalty be if Ripple is found guilty of contravening the Securities Act of 1933? If XRP is much reduced in value, then Ripple's ownership of XRP would not be a viable source of funding for any hefty fine imposed.
