3rd Largest Cryptocurrency in Terms of Market Cap
Being the 3rd largest cryptocurrency around should lend a lot of legitimacy to Ripple. Boasting to be “better than any blockchain,” Ripple revolutionizes the global payment infrastructure by making it the most scalable and fastest available. It provides seamless connections that are lower in costs and easily traceable to deliver certainty. Members of Ripple include prominent banks like Westpac, Standard Chartered, Crédit Agricole, Santander, and many more. The token for the Ripple network is known as XRP.
The Case of Never-ending ICO
Ryan Coffey is leading the class-action lawsuit representing all investors in Ripple tokens against Ripple and their Chief Executive Officer (CEO), Bradley Garlinghouse. Coffey alleges that the money raised by Ripple is through the unregistered sales of XRP tokens leading to a case of never-ending Initial Coin Offering (ICO). The lawsuit was filed in early May 2018 with the Superior Court of California against this San Francisco-based startup. It would be good to note that the U.S. Securities and Exchange Commission (SEC) Chairman, Jay Clayton has announced in December last year that all token offerings are considered securities. This inevitably means that all ICOs need to be registered with the SEC and regulated. Several clampdowns on ICOs have already taken place due to fraud allegations by the SEC.
Coffey vs Ripple
According to the filing, plaintiff, Coffey purchased 650 XRP tokens in January this year for a total of $1690. He sold it away in a few weeks’ time with an approximate loss of $551, which is a 32% loss. Coffey insists that XRP should be classified as security since the defendants acknowledges XRP investors’ expectations on its performance. Since the SEC’s announcement, the classification of XRP on whether or not it is a security is under much debate. The second largest cryptocurrency by market cap, Ethereum is under the same debate as well.
Call for Clarity Amidst the Muddle
The head of research and development at Santander, Julio Faura asserts that a framework should be made available to recognize from the very starts that ICOs are securities. This goes in hand with a report by the global head of investment research at Goldman Sachs that suggested ICO investors could risk losing their entire investment. Faura’s argument is that ICOs needs to be regulated to protect investors.
Ripple did managed to raise approximately $94 million through venture capital alone and could have possibly disregarded an ICO. Nevertheless, the ICO is still an ingenious way for blockchain companies to raise funds. While regulations are shaping up, it would be critical to prioritize funding blockchain companies to enable their development and not leaving investors in the dark at the same time.