A US lawsuit against Ripple Labs Inc., the issuer of the world’s third-largest cryptocurrency, has sent the value of the XRP currency plunging but Indian exchanges have refrained from restricting its trading although they are closely monitoring the case.
The US Securities and Exchange Commission (SEC) case argues that XRP is a security rather than a currency and hence the issuer should have sought prior approval of the US securities regulator for launching it. It added that Ripple Labs and two of its executives raised over $1.3 billion through their unregistered digital asset securities offering.
Launched in 2013, XRP had a market cap of around $16 billion on December 25, about two-thirds of the $24 billion it was worth on December 21.
On December 22, the SEC filed a complaint against Ripple for an “unregistered securities offering”, alleging that XRP was a security rather than a currency. An issue of securities in the US requires approval from the SEC. This caused the price of Ripple to drop from 0.56 US cents on December 21 to around 0.28 cents on December 24, a 50% drop. On December 25, the currency traded around 0.33 cents, a little above its recent lows.
Indian cryptocurrency exchanges expressed shock at the development.
“Ripple (XRP) is one of the most popular cryptocurrencies. It has also been among the top traded tokens on WazirX. SEC’s lawsuit against Ripple is shocking. Given the uncertainty of this situation, we will continue monitoring the lawsuit development and then take the necessary steps,” said Siddharth Menon, co-founder and chief operating officer of WazirX, India’s largest crypto exchange by volumes.
Neeraj Khandelwal, the co-founder of crypto exchange CoinDCX, said, “We are closely following the developments and waiting for more information on the matter before taking a decision.”
Cryptocurrency professionals also drew a distinction between XRP and other cryptocurrencies.
“Cryptos like Bitcoin and Ethereum can be mined by anyone. There is no issuer and owner. This was never the case with XRP. Ripple Labs owned 98% of it and issued a little bit every year. The company set the supply (100 billion tokens). This makes it more like a security than a cryptocurrency,” said Gaurav Dahake, chief executive of Bitbns, a cryptocurrency exchange.
The lawsuit is also likely to influence regulators in other countries, including India.