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MoonLambo

Is Ripple able to claim XRP is not a security due to a loophole?

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Man I don't know how much simple it can get based on what is said here XRP is not a security 

SEC Chairman Jay Clayton stated yesterday that cryptocurrencies like Bitcoin that are intended to be replacements or alternatives to sovereign (fiat) currencies are not securities. This adds clarity to the question of what cryptos/digital assets are securities.

I also notice every site is putting it's own spin on this article.  There is no loophole.  I think this article sums it up best a little less vague but the Bullseye is on ICO's .  I think this information alone is huge because it pretty much says XRP is not a security because a.) XRP's main goal is a replacement or alternative to Fiat, It  wants to replace Nostro/Vostro(Fiat)!!!!  Let the Flood Gates open!!!!        

https://www.ccn.com/sec-not-changing-securities-rules-to-accommodate-icos-but-bitcoins-fine-chairman-clayton/

Edited by RikkiTikki

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1 hour ago, RikkiTikki said:

Man I don't know how much simple it can get based on what is said here XRP is not a security 

SEC Chairman Jay Clayton stated yesterday that cryptocurrencies like Bitcoin that are intended to be replacements or alternatives to sovereign (fiat) currencies are not securities. This adds clarity to the question of what cryptos/digital assets are securities.

I also notice every site is putting it's own spin on this article.  There is no loophole.  I think this article sums it up best a little less vague but the Bullseye is on ICO's .  I think this information alone is huge because it pretty much says XRP is not a security because a.) XRP's main goal is a replacement or alternative to Fiat, It  wants to replace Nostro/Vostro(Fiat)!!!!  Let the Flood Gates open!!!!        

https://www.ccn.com/sec-not-changing-securities-rules-to-accommodate-icos-but-bitcoins-fine-chairman-clayton/

I'm not sure if you didn't read my whole post or if you don't understand what I'm attempting to convey. Let me try again:

Interviewer: "Is it possible the SEC might say these were securities at one time but no longer are because they're not centrally controlled, for example?" to which Mr. Clayton responded "That's a question that is out there, and, ya know, we'll be answering the specific facts and circumstances, but we've been doing this a long time, and there's no need to change our fundamental approach." This does not add clarity to the situation. The fact that you think this is by any means "clear" is silly to me because the SEC Chairman acknowledged here an unanswered, and very important, question.

In addition to that, do you understand what I'm saying when I use the term loophole? People created XRP, then then some of the people that created XRP went on to create Ripple and gifted a bunch of to themselves (Ripple) essentially. Ripple has been and continues to sell it's XRP holdings on the open market under a company they created called XRP II, LLC, raising funds just like businesses that have ICOs do. So, had the creators of XRP created the company Ripple first and THEN XRP, under what Mr. Clayton has stated, XRP would be deemed a security. But because XRP & Ripple were created in reverse fashion, it is not a Security, which would be a loophole. See what I'm saying?

Given that seems to be the case, my next point is that if this is an allowable loophole, people can create new cryptocurrencies and get that decentralized, distributed ledger system going, then they can create a new company and just gift all the coins to themselves and sell them on the open market. It sounds like a loophole to me and this is what Ripple has done. Is that more clear?

I'm **NOT** taking a stance that XRP is a security. Let me be crystal clear on that. But to ignore what I'm stating here would be blissful ignorance and I'm raising fair points. Like I said in my post above though, no one knows for sure how this will shake out, not even the SEC. I accept that. Give this time to cook.

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1 hour ago, RikkiTikki said:

I think this information alone is huge because it pretty much says XRP is not a security because a.) XRP's main goal is a replacement or alternative to Fiat, It  wants to replace Nostro/Vostro(Fiat)!!!!  Let the Flood Gates open!!!!        

Um, when they say that XRP will replace nostro/vostro, it doesn't mean literally "replace" it- it means XRP will make it obsolete and not needed.

Ripple (and Brad) have specifically said numerous times that XRP is NOT intended to replace fiat.

OP you're making me nervous...

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1 hour ago, RikkiTikki said:

Man I don't know how much simple it can get based on what is said here XRP is not a security 

SEC Chairman Jay Clayton stated yesterday that cryptocurrencies like Bitcoin that are intended to be replacements or alternatives to sovereign (fiat) currencies are not securities. This adds clarity to the question of what cryptos/digital assets are securities.

I also notice every site is putting it's own spin on this article.  There is no loophole.  I think this article sums it up best a little less vague but the Bullseye is on ICO's .  I think this information alone is huge because it pretty much says XRP is not a security because a.) XRP's main goal is a replacement or alternative to Fiat, It  wants to replace Nostro/Vostro(Fiat)!!!!  Let the Flood Gates open!!!!        

https://www.ccn.com/sec-not-changing-securities-rules-to-accommodate-icos-but-bitcoins-fine-chairman-clayton/

Eventhough xrp nullifies nostro accounts, its main purpose is sourcing liquidy and for payment providers to expand reach into new markets…I think you’re getting lost in the context of “replacing fiat”. Brad himself has stated multiple times that we want to work with banks, that government isn’t going anywhere. So I don’t think xrp  really replaces FIAT currency.

“banks can source liquidity on demand in real time
without having to pre-fund nostro accounts.”

“Payment Providers use XRP to expand reach into new markets, lower foreign exchange costs and provide faster payment settlement.”

What I got from the SEC so far is that they really don’t know how to approach or regulate cryptocurrency and want to scare market makers into registering with them. In my opinion, worst case scenario if xrp is deemed a security, they can take it to court and fight it. Is the SEC willing and able to sustain a barrage of lawsuits from EVERY COIN that is deemed a security??  There are already talks that many coins are already lawyering up in anticipation of the SEC categorizing them as a security. So we’ll see how it all pans out!

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I think they are still trying to decide how to classify these tokens. The way I understood from the result of a previous case is that if the coin is offered with the statement that those who purchase it will reap profits (as was the case of the coin that was launched in ether network, the idea was that people could use this coin to invest in projects which would then increase in value and that value then would come back to the coin owners), then that coin can be considered a security.

XRP doesn't fit the definition for several reasons, but the most important is that Ripple when it offers XRP to purchasers, especially with institutional players, does so by suggesting that XRP could be used as an internet of value token, aka a utility token for fast exchange of value across borders. There's no suggestion of profits in these transactions. The other point being that there are multiple parties including the XRPcommunity, the funds, the new payment companies that use XRP as a safe/fast/decentralized asset for different purposes which while may increase the demand for the asset, are not necessarily about the underlying fiat equivalent value of the asset at hand.

I guess from SEC's perspective the other part that would be very hard if not impossible to judge is who the responsible parties would be, because Ripple didn't create XRP and didn't distribute it. It got a certain amount which it mostly stores now. Sure Ripple sells a bit of XRP every now and then, but so do Jed and Chris or at this point in fact anyone who owns XRP may and does sell a bit, do we all become legally responsible for XRP as a security now? I mean I am not making any promises to whoever is buying /willing to exchange their FIAT for my XRP on the exchange. So where does this lead us? I think the law suit was a cheap shot taken at Ripple because obviously there's a rare case of an actual organization that people can refer to, but in reality if you have an issue with XRP shouldn't you go back and sue Jed McCaleb and Chris Larsen and so on? 

"In addition to the payment network and distributed exchange, Ripple also includes its own internal Ripple currency, XRP (sometimes called ripples). Users of the Ripple network are not required to use XRP as a store of value or a medium of exchange. The network is currency agnostic. XRP exists to fulfill two primary network functions—to stop network spam and to act as a bridge currency. To stop network spam, a small amount of XRP must be used in each transaction, and this XRP is destroyed after use.

The XRP currency is the only currency in the Ripple system that does not entail counter-party risk: an XRP balance is not dependent on any organization backing it. Unlike IOU balances, it does involve exchange rate risk however. The creators of ripple created the network with 100 billion XRP, and gifted a for-profit company, Ripple Labs (originally called Opencoin), with 80 billion XRP. Ripple Labs intends to distribute 55 billion XRP to users of the network, and will keep the rest, in the hope that this XRP will grow in value over time."

https://www.netswitch.net/missed-bitcoin-no-worries/

 

 

jed.JPG

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I don't think the SEC want to open the 'gifting' can of worms.  They would effectively be opening a loophole themselves.  There are arguments on both sides of this. I personally don't think Ripple checks enough boxes to be considered a security.  Hopefully, background power plays or bank lobbying don't sway things in the wrong direction.  I did see the SEC hired a new Director of the Division of Trading and Markets at the end of last year.  Guess were he came from?   - JP Morgan Chase.

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if xrp were deemed a security, wouldnt that only apply to the original founders and issuers of the xrp tokens anyway, and not ripple the company?

for example, if these are somewhat like (akin to, hypothetically) equity securities (e.g. common stocks) wouldnt it be analogous to someone gifting a lot of stock to a company, rather than the company itself being the issuer and collateral?

i know we're dealing with a new asset class here, but still, just trying to understand why ripple, who were (supposedly) receivers of and not issuers of, are liable for obligations anyway

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24 minutes ago, zerpdigger said:

if xrp were deemed a security, wouldnt that only apply to the original founders and issuers of the xrp tokens anyway, and not ripple the company?

for example, if these are somewhat like (akin to, hypothetically) equity securities (e.g. common stocks) wouldnt it be analogous to someone gifting a lot of stock to a company, rather than the company itself being the issuer and collateral?

i know we're dealing with a new asset class here, but still, just trying to understand why ripple, who were (supposedly) receivers of and not issuers of, are liable for obligations anyway

I have the exact same question in mind, one would have to go back to Jed and Chris and so on to sue if one is to sue.

I think it would be absurd to suggest that the XRP sold by Ripple Labs should be classified as a security while the XRP held/sold/distributed by the original creators should be a token. And there's definitely no case to be made for the XRP held by original creators to be deemed a security.

The more I think about it and simulate potential decisions, the more I am convinced that XRP as a token can not be deemed a security because of its unique properties as a utility token. Because of the interchangeable nature of these tokens, it really is not possible to classify the entire asset as a security. It just doesn't fit the bill. So the worst, the absolute worst that can come as a decision (and this would still be absurd but let's say it goes this way) would be perhaps SEC could tell that Ripple Labs can not sell the 60 billion XRP it owns, in the US or to US citizens or corporations. That wouldn't mean however that other owners can not exchange XRP in the US. And  they can't really classify the asset class as a security.

I mean, go back to Howey case, thousands of people own millions of citrus groves in the US. The citrus groves in the US didn't suddenly all become securities. It was only the part that was owned by Howey Company and was offered to the public as part of a land sales contract that was deemed later as a security. But the unique thing here is that one can differentiate between that land and the citrus grove on it and the rest of the citrus groves in the US. The same cannot be done for the XRP due to its transitive nature. There's no way of knowing whether the XRP you have comes from Ripple Labs or the XRP that was given away or was sold by Jed etc, except for the cases where institutional purhcases directly bought from XRP II. And given this fact, it's literally impossible for the entire XRP asset category to be deemed a security. 

https://supreme.justia.com/cases/federal/us/328/293/case.html

Edited by Guest

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28 minutes ago, XRabid said:

Um, when they say that XRP will replace nostro/vostro, it doesn't mean literally "replace" it- it means XRP will make it obsolete and not needed.

Ripple (and Brad) have specifically said numerous times that XRP is NOT intended to replace fiat.

OP you're making me nervous...

What are Nostro/Vostro accounts at their root???? XRP won't replace fiat of course not but in this use case it will essentially replace it because it no longer will be needed Obsolete as you mentioned.  In the use case a fiat  based Nostro\vostros go XRP's goal is to replace those account so it will be used as a medium circumventing the use of those accounts.  if XRP displaces Nostro/Vostro accounts it's replacing fiat in that use case (Not a security) again more definition is needed but out of the horses mouth it was said so were at least good at that point.

Edited by RikkiTikki

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It seems to me that the whole question is misdirected... regulators are trying to make rules according to pre-existing classifications -stocks, bonds, securities, commodities etc. while there is an entirely new asset class that needs its' own rules.

After all, there didn't used to be any of the existing asset classes at one time, and regulations developed to support their specific qualities...

Edited by GiddyUp
sp

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29 minutes ago, ed1 said:

The more I think about it and simulate potential decisions, the more I am convinced that XRP as a token can not be deemed a security because of its unique properties as a utility token. Because of the interchangeable nature of these tokens, it really is not possible to classify the entire asset as a security. It just doesn't fit the bill. So the worst, the absolute worst that can come as a decision (and this would still be absurd but let's say it goes this way) would be perhaps SEC could tell that Ripple Labs can not sell the 60 billion XRP it owns, in the US or to US citizens or corporations. That wouldn't mean however that other owners can not exchange XRP in the US. And  they can't really classify the asset class as a security.

agree, and i think either way ripple is protected to some degree by not being the originating issuer

i think we'll see cryptoassets being classed as commodities unless they promise returns etc which just fall under preexisting frameworks anyway

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@MoonLambo

Dont know much about securities law but everything you said makes sense and yes in theory anyone could create a token and gift it to themselves via a third party and play the loophole.

On a separate note, it seems increasingly obvious to me that for various other reasons, XRP won’t be deemed a security.

 

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2 hours ago, RikkiTikki said:

Man I don't know how much simple it can get based on what is said here XRP is not a security 

SEC Chairman Jay Clayton stated yesterday that cryptocurrencies like Bitcoin that are intended to be replacements or alternatives to sovereign (fiat) currencies are not securities. This adds clarity to the question of what cryptos/digital assets are securities.

I also notice every site is putting it's own spin on this article.  There is no loophole.  I think this article sums it up best a little less vague but the Bullseye is on ICO's .  I think this information alone is huge because it pretty much says XRP is not a security because a.) XRP's main goal is a replacement or alternative to Fiat, It  wants to replace Nostro/Vostro(Fiat)!!!!  Let the Flood Gates open!!!!        

https://www.ccn.com/sec-not-changing-securities-rules-to-accommodate-icos-but-bitcoins-fine-chairman-clayton/

It can get much simpler my friend, XRP is not a security. 

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