Ripple’s prolonged legal confrontation with the U.S. Securities and Exchange Commission (SEC) has reached a decisive conclusion. The SEC initiated its lawsuit against Ripple in 2020, asserting that the company violated financial securities laws through its issuance of the cryptocurrency token, XRP. This legal battle posed significant threats to Ripple’s business model and adversely affected the value of XRP for several years.
The tide began to shift following the reelection of President Donald Trump in November, who vowed to establish America as “the crypto capital of the world,” advocating a more favorable regulatory framework for the cryptocurrency industry. With the appointment of crypto supporter Paul Atkins as head of the SEC, the agency has since withdrawn from several high-profile cases against major players in the industry, including Binance and Coinbase.
In August, the SEC dropped its case against Ripple, effectively concluding a grueling five-year dispute. The legal saga stemmed from the SEC’s contention that XRP qualified as a financial security, akin to stocks and bonds. If the court had sided with the SEC, Ripple would have been subjected to stringent regulations that could have compromised its operations.
Ripple’s primary offering is the Ripple Payments network, which enables instantaneous cross-border transactions among banks without relying on intermediaries like the SWIFT network. This innovation allows banks to transfer funds directly, significantly reducing transaction delays and costs. XRP serves as a bridge currency within this network, facilitating cheaper transactions compared to traditional foreign exchange methods.
As of now, there are 59.6 billion out of a total supply of 100 billion XRP tokens in circulation, with Ripple controlling the remaining tokens. This structure indicates that XRP operates as a centralized cryptocurrency, unlike decentralized currencies like Bitcoin. The SEC’s lawsuit hinged on the classification of XRP as a security, which would have imposed strict regulatory requirements on Ripple.
The legal landscape took a favorable turn for Ripple in August 2024 when a judge issued a ruling that largely favored the company. Although the SEC lodged an appeal, the change in administration and the SEC’s pro-crypto stance led to the withdrawal of the appeal, effectively ending the case.
In the wake of the lawsuit’s resolution, XRP experienced a notable surge, reaching a new record high in July for the first time in seven years. This rally was further energized by the introduction of the ProShares Ultra XRP ETF, which invests in futures contracts linked to XRP. Investor speculation now points toward potential regulatory approval for spot ETFs, which could bring further momentum to XRP’s market position.
However, skepticism persists regarding the long-term viability of XRP as a stable investment. Unlike Bitcoin, which has established itself as a reliable store of value, XRP’s role as a bridge currency may not translate into sustained growth or value appreciation. Furthermore, Ripple Payments’ support for fiat currencies means that the inherent value of XRP may remain constrained.
If Ripple Payments fails to establish XRP as a credible vehicle for value creation, and if ETFs do not provide the anticipated advantages seen with Bitcoin, price fluctuations may remain a significant feature of XRP’s market behavior. Historically, after reaching its previous peak in 2018, XRP’s value plummeted by over 90% in the following year, raising questions about the token’s long-term viability and exposing investors to potential volatility again in the future.
