XRP and the SEC

[Qatrikias]

Longtime lurker in the forum here, new "member" -- though I've been in XRP since 2013.

There is a lot of chat around here about how XRP will thrive as Etherium-based ICOs and Bitcoin itself start facing greater scrutiny from the SEC. Obviously, bring a banking product, and Larsen's background in the mortgage industry make the folks at Ripple better positioned to deal with increased attention from regulators, but has there been any effort on Ripple's part to engage the SEC in advance -- specifically with regard to XRP?

I think of this as I read this piece on coindesk today: http://www.coindesk.com/initial-coin-offering-ico-where-sec-might-stand/ 

Despite the case not being specifically about a crypto, the SEC seems to be expanding its definition of what a security is, and where its jurisdiction expands.

Quote

1. The 'economic reality' of the AdPack purchases was more similar to an investment than a purchase of a service, because demand was "driven by members purchasing and repurchasing AdPacks in order to obtain the incredible returns on their investment, not by intense demand for Traffic Monsoon’s services".

2. The returns from the AdPacks came "solely from the efforts of others", despite the fact that investors were required to personally visit other websites to participate in revenue sharing.

1

Grateful for any links and thoughts -- and if this has been discussed elsewhere on XRPchat, happy to be directed there. A brief search didn't come up with much.

[Kylo Ren]

Larsen had to get Prosper approved, right?  So he seems well positioned to do so for Ripple.

[Qatrikias]

No doubt. And, as has been mentioned, SEC and banks interest and vision tends to align more closely than, say the SEC's and products traded overwhelmingly on unregulated Chinese exchanges (looking at you, bitcoin).

Well-positioned seems right -- but I can't help but wonder if this ICO bonanza isn't going to come back and bite the more legitimate products as well. If the SEC starts cracking down on ICOs, it may also decide Ripple (the software company) is great, but XRP (the unregistered security) is indistinguishable from the ICOs they're smashing...

Once SEC determines something is a "security", there are a whole host of laws it must conform to.

https://www.sec.gov/answers/about-lawsshtml.html

 

[Kylo Ren]

Oh it's the wild west right now for sure.  And the government will want to protect people and obtain their taxes so regulation of some form is definitely coming.

[ripplegigolo]

1 hour ago, Qatrikias said:

If the SEC starts cracking down on ICOs, it may also decide Ripple (the software company) is great, but XRP (the unregistered security) is indistinguishable from the ICOs they're smashing...

Once SEC determines something is a "security", there are a whole host of laws it must conform to.

Hi, how do you think this will affect XRP? Not price, but more in terms of regulations. What laws? Consequences for tax-regime and withdrawing? Also for people outside USA? 

[CNFlinch]

@Qatrikias since you have been a lurker I'm not sure which information you might already know. 

Ripple has a list of their regulatory engagements here: https://ripple.com/policy-framework/

One of the early day issues with XRP and BTC was what to classify them as. Are they a currency, a security, a commodity etc.  Depending on the characteristics and purpose of a virtual currency you can probably fit it into any of the categories.

The SEC is interested in some of the ICOs because they seem to be taking on the characteristics of IPOs or other kinds of equity investments but circumventing all of the sophisticated investor and company disclosure rules.  

I'm not familiar with Ripple directly engaging the SEC, however, they seem to have been successful in outlining XRP as a virtual currency both when applying for the NYS Bitlicense and below, in FINCEN's factual determination:

https://www.fincen.gov/sites/default/files/shared/Ripple_Facts.pdf

[snowpar]

Coin Center, Coinbase, Union Square Ventures, Consensys, and the law firm Debevoise & Plimpton published a securities law framework document in December 2016 to analyze cryptocurrencies as potential securities. What the SEC decides to do could be completely different from this document. 

https://www.coinbase.com/legal/securities-law-framework.pdf

[GoGoGo]

In the UK and Ireland all companies publish their annual report and accounts publicly. Is this also the case in USA? Can we see the annual accounts of Ripple? @JoelKatz

[OlivierA]

17 minutes ago, GoGoGo said:

In the UK and Ireland all companies publish their annual report and accounts publicly. Is this also the case in USA? Can we see the annual accounts of Ripple? @JoelKatz

In Canada, private companies don't have to release publicly their annual report. I think it's the same in the US.

To be verified, but unless they are traded on the open market, I don't think UK companies have to release anything publicly either. Are you sure "all" companies have to do that?

Edited June 16, 2017 by OlivierA

[GoGoGo]

@OlivierA @JoelKatz Yes, of course. All of them. Try any UK company here: http://beta.companieshouse.gov.uk

You can search either by name or company registration number.

Edited June 16, 2017 by GoGoGo

[OlivierA]

4 minutes ago, GoGoGo said:

@OlivierAYes, of course. All of them. Try any UK company here: http://beta.companieshouse.gov.uk

You can search either by name or company registration number.

that's the general info about administrator and date of incorporation, I don't see their financials.

[Qatrikias]

@CNFlinch, @snowpar - those are helpful links. Nothing specifically regarding a potential SEC classification, but certainly excellent broadcasting of intent to comply with whatever guidance is issued. Still early days.

@ripplegigolo, honestly I'm inclined to side with those who say clear regulation from the US would be beneficial. Certainly, there will be tax and reporting implications that go along with it. As it stands it's pretty much an honor system that has US crypto traders reporting their gains to the IRS. That would change, which, frankly, would be great for the whole space. Look no further than marijuana laws in Colorado/California/etc to see what a "please regulate and tax our industry" approach can accomplish.

I doubt it would have much effect on XRP traders outside of the US -- except insofar as they benefit from the spillover a more stable regulatory system at home would create. The US tends toward policies they think will attract foreign money to US firms and products. 

[ripplegigolo]

@Qatrikias Thanks for your thoughts om this. I agree with you on the importance of regulation. This is one of the reasons I am into XRP.

[Qatrikias]

5 hours ago, CNFlinch said:

Are they a currency, a security, a commodity etc.  Depending on the characteristics and purpose of a virtual currency you can probably fit it into any of the categories.

After spending a bit of time on the Google Sheet included in @snowpar's link, it seems like the answer to this question is going to change based not just on which crypto you're talking about, but also which regulator you're talking to. Maybe best for lawmakers simply to create a new category. Otherwise we're all just trying to describe hypercubes from a 3D world... the answer is always "well, yeah, it's kind of like that".

 

[GoGoGo]

@OlivierA After searching for a company, go to "filing history" and see all their filings, including financial accounts. For example, some random company I just searched: http://beta.companieshouse.gov.uk/company/07043640/filing-history