The Rapid Downfall of Ripple's XRP

The Rapid Downfall of Ripple's XRP—And What’s Next

Sunday’s FIN installment was entitled Yes, Ripple's XRP Is a Security. Deal With It. It affirmed that the Securities and Exchange Commission complaint that Ripple’s XRP “currency” is in fact a security, and argued that Ripple and many (but not all) cryptocurrencies will need to adjust to the dramatic new reality of registering with the SEC. That registration means owning up to all potential risk, especially the potential for market manipulation, which the SEC says was a major problem with XRP. FIN’s final sentence was: “[I]t will be intriguing to see if any of the exchanges where XRP continues to trade will feel compelled to remove it.”

And how—the exchanges have been running away from XRP like it was a COVID superspreader. Crypto.com is out, Bittrex is out—and so not surprisingly, the value of XRP is down some 60%. XRP is finished, and Ripple’s executives Brad Garlinghouse and Chris Larsen may well be forced to cough up the hundreds of millions they made selling XRP.

The exchanges’ reasoning is obvious, right? Once the SEC has declared any asset to be an illegally sold security, then any exchange allowing it to be traded has a legal liability. Similarly, as American Banker reported on Tuesday, banks that had once touted their relationships with Ripple/XRP are now tip-toeing away.

Over the next several days, the compliance departments of many other cryptocurrencies will be scrambling to figure out if they meet or avoid the standards the SEC established in the Ripple complaint. Too early to name names, perhaps, but: Keep your eye on some China-based cryptos with a structure similar to XRP’s.