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Chris Giancarlo, who as a CFTC chairman decreed that both Bitcoin and Ether were not securities, has argued the same for XRP.
Chris Giancarlo, American attorney and former business executive who served as 13th chairman of the United States Commodity Futures Trading Commission wrote recently in the International Financial Law Review that XRP, the cryptocurrency formally known as “ripple,” is not a security. That would be great news for Ripple – if he still was a regulator. But he isn’t.
However, the paper named, “Cryptocurrencies and U.S. Securities Laws: Beyond Bitcoin and Ether,” co-authored by commodities lawyer Conrad Bahlke of New York law firm Willkie Farr & Gallagher LLP, methodically reviews the criteria of the Howey Test, established by the SEC in 1946 to determine whether something is a security, and explains, point-by-point, that XRP does not qualify.
XRP is now the fourth-largest cryptocurrency by market cap, with $5.9 billion worth of the asset in circulation.
The eventual SEC’s decision of classifying (or not) XRP as security will have a huge effect on owners of the cryptocurrency, and the other clients using Ripple services as are American Express, Santander, and SBI Holdings.
Giancarlo and Bahlke wrote:
“Ultimately, under a fair application of the Howey test and the SEC’s presently expanding analysis, XRP should not be regulated as a security, but instead considered a currency or a medium of exchange.”
How to Prove that XRP Is Not a Security
The Howey test Giancarlo uses to boost his arguments is a test created by the Supreme Court for determining whether certain transactions qualify as “investment contracts.” If so, then under the Securities Act of 1933 and the Securities Exchange Act of 1934, those transactions are considered securities and therefore subject to certain disclosure and registration requirements.
Giancarlo explains:
“The mere fact that an individual holds XRP does not create any relationship, rights or privileges with respect to Ripple any more than owning Ether would create a contract with the Ethereum Foundation, the organization that oversees the Ethereum architecture.”
It is also important the fact that Howey test designates that there can be no “common enterprise” between shareholders or a shareholder and the company.
According to its own site, Ripple has access to 6.4% of all the XRP that are there on the market. Still, that doesn’t count the 49.2% of the total XRP Ripple owns, but is locked in a series of escrow accounts that become periodically available to Ripple and Ripple alone. When you add those two percentages together you get a float of only about 44% of XRP that has been distributed for public ownership.
Even though Giancarlo is paid by Ripple, his words still have some worth. But now it’s up to wait and see what the SEC will say. This report was meant to carry some weight with the eventual decision-makers at the Securities and Exchange Commission. Ties to Ripple, however, make this questionable.
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