3 Experts Weigh in on How XRP’s Win Could Ripple Through the Market
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| By Jurica Dujmovic |
By now, I’m sure you’ve heard all about the U.S. federal court ruling that declared Ripple’s (XRP, “B”) native token is not a security.
This ruling — which has been eagerly awaited by many, including crypto enthusiasts and legal scholars — is seen as a symbolic victory.
In fact, the crypto industry views this as a potential end to the “war on crypto” that the U.S. Securities and Exchange Commission seems to be waging.
Amid this triumph, many exchanges are rushing to relist XRP, bolstering the asset's visibility and credibility.
But as I sit here sifting through legal documents and expert commentary, I'm reminded that this is far from an all-encompassing solution. Although this decision is a significant milestone, it doesn't give us the comprehensive regulatory clarity we so desperately need.
Instead, it raises many questions about how we should define, classify and regulate cryptocurrencies — especially those that don't fit neatly into the categories of "commodity" or "security.”
To dissect the complex implications of this court ruling and what it means for the future of crypto, I've decided to consult three industry experts.
Immediate Effects of Ripple’s Win on Crypto
First, I spoke with Graeme Moore, head of tokenization at the Polymesh Association — a not-for-profit organization dedicated to the growth of the Polymesh (POLYX, Not Yet Rated) blockchain.
In Moore’s view, U.S. District Judge Analisa Torres — who ruled in the Ripple case — merely echoed what many industry pundits and legal minds have already said: A token itself doesn’t automatically equate to a security.
As usual, the devil lies in the details. Moore went further and said, “It’s very possible that this decision will hold up in many other similar cases.”
So, Ripple’s partial victory could help exchanges like Coinbase (COIN) and Binance win their lawsuits against the SEC.
When asked about crypto's regulatory future, Moore was quick to point out the diminishing political favor of the SEC as one positive indicator. After being accused of hindering innovation within the U.S. and struggling to secure legal victories, the SEC appears to be in a tight spot.
Moore sees this as a golden opportunity for Congress to step up and craft a comprehensive crypto regulatory framework that would bring much-needed clarity for the industry.
If not, he warns of a potential mass departure of U.S. firms to friendlier regulatory environments in the EU and Asia-Pacific regions.
But this made me wonder: If crypto is gradually slipping out of the SEC’s grasp, does this mean that it’s inching closer to the clutches of the Commodity Futures Trading Commission?
In Moore's perspective, it's not that simple, and there are nuances. Some tokens naturally fall under the SEC's purview, while others are more suited for the CFTC.
However, Moore is confident that the U.S. will witness an increase in tokens classified as commodities.
He also made it abundantly clear that a significant number of tokens are, indeed, securities. And in many cases, their sales require investment contracts — a fact emphasized by Judge Torres.
As a closing remark, Moore made a powerful statement: “Facts are important. Broad, sweeping, unsubstantiated claims by power-hungry regulators are not.”
Potential Obstacles Ahead
Joining me next is Michel Caspers, co-founder and CMO of the Unity Network — a software development company that strives to simplify access to cutting-edge artificial intelligence and web3 technology.
When I asked him about the potential repercussions of the Ripple ruling on the broader crypto market, he was cautious.
On one hand, the surge in XRP's price was seen as a win for those who have been vouching for its status as a non-security. But he pointed out a lingering shadow on the horizon: the SEC's potential appeal.
If another judge steps in and designates XRP as a security, the financial markets would inevitably reel from the shockwaves.
And the ruling itself isn't as black and white as it seems.
To be specific, Caspers drew attention to Judge Torres' explicit differentiation between institutional investors — who purchased XRP as a security — and retail investors, who did not. It's a line in the sand that begs for further clarification, possibly in the form of additional regulation.
As a final note, Caspers concluded with some food for thought.
Although cryptocurrencies might be edging further away from the grasp of the SEC, that’s only part of the equation. For investors to confidently navigate this unpredictable world of alternative assets, they need more clarity.
2 Potential Outcomes for Crypto’s Future
Last but certainly not least, I spoke with Alexander Wermescher, founding partner and CEO at CLC & Partners — a company that provides IT and business consulting services.
When discussing the future of XRP, Wermescher outlined two potential paths, both rife with opportunities and obstacles.
First, we discussed the positive aspects of the verdict.
In particular, Wermescher highlighted the Howey test, which is a legal test used in the U.S. to determine whether a transaction is considered a security under federal law. This test has been instrumental in the Ripple case, revealing that XRP is not a security.
Now, this gives XRP some temporary relief before the potential SEC appeal, potentially opening doors for a bull run.
That’s because the distinction between venture capitalist sales and exchange sales was a critical takeaway from the ruling, due to the former being classified as an unregistered securities offering.
So, this important part of the ruling highlights the significance of a robust, engaged community, encouraging crypto projects to strive for vibrant communities rather than relying solely on venture capital funding.
However, the verdict also had its downsides. Namely, the fact that Ripple's XRP sales to institutions were deemed an unregistered securities offering could burden Ripple with a hefty $728 million fine.
The ruling's basis — that XRP buyers in exchanges and secondary markets were unaware of Ripple's XRP connection — may also prove to be a shaky foundation.
Furthermore, the financial toll on Ripple could influence market sentiments around XRP's future, given that Ripple's promotional activities have been pivotal for XRP.
Moving on to other cryptocurrencies under SEC scrutiny, Wermescher points out that the XRP ruling could serve as a significant precedent.
Entities like Coinbase might find support in their claims of not offering securities, although other allegations raised by the SEC still hang in the balance.
In light of the verdict that over-the-counter sales to institutional investors are unauthorized, a major shift in the crypto ecosystem may be on the horizon.
Specifically, community building is emerging as a vital focus area, pointing toward a healthier, more resilient crypto ecosystem.
As for the question of whether crypto might be transitioning away from the SEC's umbrella, Wermescher's take is that it's unlikely, at least in the near future.
He highlights economic challenges in the U.S. as well as the complexity of regulating such a dynamic field, suggesting that the SEC will continue to play a key role in the crypto space.
Although the regulatory landscape is always evolving, one constant remains: the need for a delicate balancing act between fostering innovation and ensuring investor protection.
Conclusion
There you have it.
While the market happily responds to the XRP verdict and anticipates a similar fate for other cryptos, it’s becoming clear that our understanding of securities and their digital counterparts is changing. It's a call for all stakeholders, developers, investors, regulators and legal experts to redefine the old and embrace the new.
In this uncharted territory of cryptocurrency regulation, we find ourselves at the intersection of technology, law and finance. The destination may be unclear, but the journey is sure to redefine our financial landscape.
The XRP case is not the end; it's just the beginning. So I suggest you keep checking back here for all the ways we’re seeing the effects ripple through the markets.
Best,
Jurica
