SEC Identifies Ripple’s Planned Stablecoin as an Unregistered Crypto Asset in Court Documents
The US Securities and Exchange Commission (SEC) has focused its attention on Ripple’s proposed stablecoin in its most recent court filing against the company. In a redacted remedies reply brief filed on May 7, the SEC referred to the planned token as an “unregistered crypto asset,” although it did not explicitly mention the term “stablecoin.” Instead, the SEC cited Ripple’s press release from April 4, which announced the issuance of a dollar-pegged digital asset. While Ripple disclosed its intention to launch a stablecoin in April, it has not provided any further details about the token since then.
Furthermore, the SEC argued that this proposed stablecoin serves as evidence that Ripple will continue to engage in unregulated activities if a permanent injunction is not granted. The regulator believes that courts readily issue injunctions in such cases because they indicate a higher likelihood of repetition. The SEC also mentioned Ripple’s plans to introduce a new unregistered crypto asset, referring to the April 4 press release. Additionally, the SEC reminded the court that it had already found Ripple’s ODL Institutional Sales up until 2020 to be in violation of the law.
The SEC has consistently argued that Ripple’s primary business involves the unregistered institutional sales of XRP and that it will continue to do so if an injunction is not issued. The regulator believes that Ripple’s ongoing business activities make it highly likely for violations to occur. Finbold, a monitoring and reporting platform, tracks and publishes data on Ripple’s monthly sell-offs, which follow a pattern. On the first day of each month, Ripple unlocks 1 billion XRP from its escrows, reserving around 20% of the unlocked amount for strategic monthly sales.
The SEC has proposed a heavy penalty of nearly $2 billion for Ripple, aiming to deter the company and other similar entities. However, Ripple argues that the court should reject this demand and proposes a civil penalty not exceeding $10 million. It is worth noting that Ripple has been selling over $100 million worth of XRP on a monthly basis for years, making each month’s sell-off over 10 times higher than the SEC’s proposed civil penalty for 11 years of business, according to the regulator.
Ripple’s chief legal officer, Stuart Alderoty, has criticized the SEC’s filing as baseless, accusing the regulator of failing to apply the law appropriately. Alderoty also pointed out the SEC’s disregard for cryptocurrency frameworks in other jurisdictions. The SEC disagrees with Ripple’s assurance that it would not violate US securities law because it holds licenses in other countries. The SEC’s lawyer described this argument as absurd, comparing it to suggesting that a New York restaurant does not need a liquor license because it obtained a fishing license in California.
As of now, XRP is trading at $0.52 per token, experiencing a 2.76% decrease in the last 24 hours. The SEC’s recent filing may potentially create further selling pressure from Ripple’s holdings and other cryptocurrency investors.
In conclusion, XRP investors and Ripple supporters eagerly anticipated the launch of the announced stablecoin, which may now be delayed due to these current developments. This legal battle has been ongoing for years, and traders have consistently used it to speculate on the token’s price performance. Therefore, traders must exercise caution in light of potential regulatory scrutiny from US authorities.