Push Back to Ripple’s “Chinese-Controlled Bitcoin, Ethereum” Claim In SEC Security Lawsuit
Ripple is holding on to its claim that XRP is similar to Bitcoin and Ether which are “Chinese-controlled” as it fights to discredit a theory by the Securities and Exchange Commission (SEC) that XRP is a security rather than a digital asset with a fully functional ecosystem and a real use case as a bridge currency.
The SEC – out of step with other G20 countries & the rest of the US govt – should not be able to cherry-pick what innovation looks like (especially when their decision directly benefits China). Make no mistake, we are ready to fight and win – this battle is just beginning. (3/3)
— Brad Garlinghouse (@bgarlinghouse) December 22, 2020
While Ripple CEO Brad Garlinghouse notes to employees on the matter that their company may be the one named in the filing but the suit is an assault on crypto at large including altcoins, market makers, exchanges etc, other players in the space differ. Garlinghouse says:
“With this allegation, coupled with the SEC’s “good housekeeping seal of approval” bestowed upon ETH and BTC only (directly benefiting China), they’re creating an unfair advantage to companies here in the US – and dramatically benefiting BTC and ETH. It’s just incredible that the SEC, a U.S. regulator is in the business of picking winners in this industry (or really any industry) and disadvantaging companies here in the US.”
Some of crypto’s top voices that have aired their views on the argument put up by Ripple include the lead developer at Ethereum, Vitalik Buterin, who notes in a tweet that the “Ripple/XRP team is sinking to new levels of strangeness”.
Looks like the Ripple/XRP team is sinking to new levels of strangeness. They're claiming that their shitcoin should not be called a security for *public policy reasons*, namely because Bitcoin and Ethereum are "Chinese-controlled". 😂😂https://t.co/ts02JqrTrB pic.twitter.com/mKwEzGIetk
— vitalik.eth (@VitalikButerin) December 22, 2020
Buterin’s comment addresses one of Ripple’s submitted set of policy reasons against finding XRP to be an investment contract is for the US not to fully cede innovation in the cryptocurrency industry to China as “(T)he Bitcoin and Ethereum blockchains are highly susceptible to Chinese control because both are subject to simple majority rule, whereas the XRPL prevents comparable centralization.”
For the former co-founder of Coinbase, Fred Ehrsam, the “Chinese-controlled” angle by Ripple is a “last ditch effort to save themselves”.
XRP was the world’s third-largest cryptocurrency by market cap as at yesterday (Dec 22) before Ripple Labs, which owns a majority of the tokens, was sued by SEC for allegedly raising $1.3 billion in an offering of unregistered “digital asset securities”.
The lawsuit has reflected negatively on the value of the XRP token as it has since seen a plunge of about 32% over the last 24 hours, according to crypto data aggregator CoinGecko. More than $7 billion has been wiped out from its market cap as at this writing.
XRP tries to pull the US vs. China card?
In its Wells Submission it presents the case that SEC’s claim that XRP distributions are investment contracts while Bitcoin and Ether are not securities is selective and “destroying U.S.-based, consumer-friendly innovation in the process.”
“XRP consistently ranks among the top three virtual currencies by market capitalization—alongside bitcoin and ether, the two Chinese-controlled virtual currencies that the SEC has stated are not securities,” it states adding that XRP is “a better alternative to Bitcoin”.
It also argues that many entities including Chinese miners own large amounts of commodities and participate heavily in the commodities markets as it cites that Ripple’s XRP holdings do not convert XRP into an investment contract nor do they mean that XRP holders have a right to rely on Ripple’s efforts or that any such reliance is reasonable.
“…—Exxon holds large quantities of oil, De Beers owns large quantities of diamonds, Bitmain and other Chinese miners own a large percentage of outstanding bitcoin. And all three have an interest that may be aligned with purchasers of the underlying asset. But no one credibly argues that those substantial holdings convert those commodities or currencies into securities.”