The SEC filed a lawsuit in December 2020 against San Francisco-based firm Ripple Labs. The fintech firm allegedly raised funds through the sale of digital assets known as XRP in unregistered securities. It’s been more than two years, but a concrete outcome to this litigation seems far away.
Furthermore, repetitive delays are making things worse for XRP holders who blamed the SEC for the same.
Different executives at Ripple have blamed the SEC for “deliberately mudding” the regulatory waters for the crypto market. Ripple general counsel Stuart Alderoty asserted his views in a blog on 13 June that highlighted the repercussions of the speech given by one of the agency’s former officials.
4 years since the (in)famous Hinman speech, and we’re nowhere closer on knowing how to classify digital assets in the US – keeping every crypto, including ETH, in regulatory limbo. I penned some thoughts for @Fortune why enough is enough, @SECGov. https://t.co/FB16cceaia
— Stuart Alderoty (@s_alderoty) June 13, 2022
William Hinman served as the Director of Corporation Finance at the SEC. In his now-infamous 2018 speech, he declared that Ether [ETH], ‘despite its well-publicized ICO in 2014’ had magically morphed from a security to a non-security. Hinman justified his conclusion, claiming Bitcoin [BTC] as “decentralized” (and thus, not security). Likewise, ETH had become “sufficiently decentralized” over time.
Ripple fought back, claiming that the then-Director of Corporation Finance, had categorized Ether and Bitcoin. Similarly, by-association XRP is a non-security due to being “sufficiently decentralized.”
Nonetheless, the SEC countered the argument by claiming that the speech was the director’s own personal views and not the official view of the regulator. Ergo, the SEC alleged that XRP is a security.
“Despite disclaimers that the speech was Hinman’s personal opinion and ‘not necessarily that of the Commission,” the market took Hinman’s speech to heart,” wrote Alderoty.
For Ripple, Hinman’s speech affirmed the conclusion that XRP is a cryptocurrency that exists on an open, permissionless, decentralized blockchain ledger.
Now, the ongoing litigation and this argument have been the most pivotal aspect of the Ripple vs. SEC lawsuit. The renowned executive opined,
“By bringing enforcement actions–or threats of potential enforcement–the SEC intends to bully, bulldoze, and bankrupt crypto innovation in the U.S. All in the name of impermissibly expanding its own jurisdictional limits.”
The lawsuit remains a part of the “SEC’s assault on all crypto in the U.S. by treating every cryptocurrency as a security. Like a hammer wanting everything to be a nail, the SEC is keeping everything murky so it can argue every crypto is security,’ the executive added.
In the four years since Hinman’s speech that did nothing but added mud to the crypto waters. The U.S. still desperately needs clear rules related to the crypto road that embrace innovation while protecting consumers and the integrity of markets. Not just Alderoty, but even, Brad Garlinghouse had censured the regulatory watchdogs on similar grounds.