TechCrunch founder Michael Arrington discussed the SEC’s lawsuit against Ripple Labs over XRP.
The Commission claims that XRP is a security, making Ripple and its top executives violate federal securities law on the sale of XRP tokens. For a cryptocurrency to be classified as a security, it must comply with the Howey Test, which is essentially a measure designed to determine whether an asset falls within the scope of a security.
By Howey’s test, an asset is classified as a security if the monetary investment generates profits from base in the efforts of others. Arrington said, however, that the Howey Test was out of date.
According to Arrington, the SEC was free to regulate anything it wanted as a security, since the agency would like everyone to use its security definition when supervising assets. He added that the reason that crypted assets were created and gained more strength was due to distrust of the dollar. Arrington said that while he didn’t think XRP was a security, his personal point of view didn’t matter.
He hoped, however, that regulatory clarity for cryptocurrencies would result from the process. In discussing Howey’s test, he said that a “hundred-year test is absolutely useless in the modern world.”
Arrington’s opinion came when many expressed their two cents on the outcome of the SEC case.
Is Tether next in line for a SEC sanction?
Currently, with the pre-test scheduled for February 22, there has been an increase in tension in the crypto community regarding the XRP result. If XRP is considered a security, the future of other cryptocurrencies could be threatened, like Tether. According to research by John M. Griffin, the tether (USDT) stablecoin, which is backed by 1: 1 against the US dollar, is driven by supply, not demand.
This may indicate that Tether played a big role in pushing Bitcoin’s price up during the infamous 2017 high, when BTC hit its first historic high.
Furthermore, the fact that the $ 12.4 billion USDT in circulation has not been proven to be fully backed by USD at the bank was enough for the New York Attorney General to go after the Tether. If the SEC adds its own charges, it could result in the USDT exchange rate outgoing, just as they did with the XRP.
The SEC process will be huge for the cryptocurrency community, as it will definitely change the course of how cryptocurrencies are regulated in the United States. Although the SEC is set to regulate XRP as a security, other G20 countries have not followed suit, classifying the token as a cryptocurrency.
Currently, while most major exchanges have stopped XRP trades for their US customer base, what may be keeping XRP afloat is that most of their trading volume appears to come from Asia.