One of the longest-running lawsuits impacting the future of cryptocurrency regulation may be nearing resolution.
Lawsuit between cryptocurrency companies Ripple Labs And the United States Securities and Exchange Commission The SEC’s debate revolves around whether Ripple’s XRP token is a security, and has gone through several iterations since the start of 2020.
On Wednesday (August 7), the scales tipped in favor of Ripple, which Ordered The federal court ordered the company to pay a civil penalty of $125 million and issue an injunction against future violations of securities laws.
The SEC was seeking fines and penalties totaling $2 billion.
“The SEC sought $2 billion, but the court found the SEC had overreached by reducing its request by 94 percent,” the Ripple CEO said. Brad Garlinghouse He said on Wednesday post About X.
Garlinghouse added that the court’s decision is “a victory for Ripple, the industry, and the rule of law” and that “the SEC’s headwinds against the entire XRP community are over.”
Many in the digital asset industry have been closely watching developments in the Ripple case because of its broad implications for the SEC’s crypto-regulatory powers, and the judge’s ruling did little to provide further clarity on the ultimate question underlying the SEC’s case: whether cryptocurrencies are securities.
The ruling also casts doubt on the future of Ripple’s XRP token’s use for cross-border payments, at least by U.S. companies.
read more: The Benefits of Blockchain in Regulated Industries
The lawsuit the cryptocurrency industry has been waiting for
Since the SEC filed its first lawsuit against Ripple on Dec. 22, 2020, crypto companies have been waiting for a final ruling on whether digital assets are securities.
While they wait, they continue to sell and issue cryptocurrency regardless.
As Amyas Gerety,partner QED Investortold PYMNTS last summer that “business as usual” could be the best option for beleaguered crypto players because it could bolster their legal stance.
Gerety added that even if the SEC ultimately prevails in court, classifying crypto tokens as securities is unlikely to destroy the U.S. digital asset industry.
However, Ripple’s continued sale of XRP tokens despite the SEC lawsuit remaining unresolved has prompted comments from the judge presiding over the case.
“To be clear, the Court has not today determined that Ripple’s post-complaint sales violate Section 5.5,” Wednesday’s legal decision read. “Rather, the Court finds that Ripple’s efforts to push the boundaries of the order indicate that the company may eventually exceed those boundaries (if it has not already done so). Taken together, the Court finds that future violations are sufficiently likely to merit the issuance of an injunction.”
And the injunction means that Ripple cannot continue selling its tokens to accredited investors in the U.S., even though the ruling says that legally, XRP is “just an alphanumeric cryptographic sequence” and not a security in itself.
referenceUnderstanding the product-market fit of cryptocurrencies in cross-border payments
What impact does this ruling have on cross-border payments?
According to the judge’s statement, Ripple sold XRP tokens in the United States under “Regulation D,” butDisqualification of bad actorsRipple cannot violate this provision because the $125 million fine imposed on Ripple in the ruling disbars it. Ripple asked the judge to waive the disbarment, but the judge rejected the request.
And this debarment could jeopardize the use of XRP, especially for facilitating cross-border payments.
Blockchain-based cross-border solutions, especially stablecoins, are increasingly being embraced by businesses looking for better ways to trade and expand internationally.
“The fundamental problem with this is how long it takes to move funds across borders. There are expensive fees to move money across borders. And you can’t track your payment to know for sure it has arrived.” Brooks Entwistle“As these businesses grow, they need to move value faster and to more places,” Ripple’s senior vice president and managing director of global customer success told PYMNTS in a previous interview.
PYMNTS Intelligence concludes that when it comes to cross-border payments, blockchain solutions may have an advantage over traditional systems because blockchain’s high throughput, low fees and 24-hour availability can eliminate much of the friction in cross-border transactions.
