Ripple Inc., one of the leading companies in the cryptocurrency space, has vowed to defend itself against a potential lawsuit from the U.S. Securities and Exchanges Commission (SEC) over claims that the company violated securities laws in the sale of its digital asset called XRP.
In a scathing attack on SEC Chairman Jay Clayton who will be stepping down at the end of the year despite his term expiring in June 2021, Ripple CEO Brad Garlinghouse said the SEC boss, “in his final act – is picking winners and trying to limit U.S. innovation in the crypto industry to BTC and ETH.”
The suit, which is yet to be filed, will name Garlinghouse and Ripple co-founder Chris Larsen as defendants.
Ripple “ready to fight and win”
Ripple challenges SEC’s theory that XRP is an investment contract, citing that it is “wrong on the facts, the law and equities.”
The company argues that XRP is a currency similar to the top two leading digital assets – bitcoin and ethereum – which the regulator does not view as securities.
Ripple asserted that XRP is a better alternative to bitcoin and consistently ranks in the top three digital assets by market cap alongside BTC and ETH, which are controlled by China.
These remarks did not sit well with Ethereum co-founder Vitalik Buterin who pointed out that the Ripple/XRP team could be “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
Ripple further says that XRP, which does not satisfy the Howey Test, was considered a currency by the DOJ and the Financial Crimes Enforcement Network (FinCEN) in 2015.
“No foreign regulator has determined that XRP is a security. In fact, just the opposite is true. The U.S. would the unfortunate outlier,” wrote Ripple.
Ripple has the full support of its Japanese partner, SBI Holdings, a Tokyo-based financial services company. SBI CEO Yoshita Kitao pledged that the company “remains a steadfast partner to Ripple.”
Japan’s FSA has already made it clear that XRP is not a security. I’m optimistic that Ripple will prevail in the final ruling in the US. SBI Holdings remains a steadfast partner to Ripple, and looks forward to expanding together in Asia. https://t.co/MFRxLLAZdG
— 北尾吉孝 (@yoshitaka_kitao) December 22, 2020
Garlinghouse accused the SEC of being “out of step with G20 countries and the rest of the U.S. government.”
“Make no mistake, we are ready to fight and win – this battle is just beginning,” he tweeted.
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
Ripple previously threatened to leave the U.S. due to a lack of regulatory clarity. Garlinghouse considered moving Ripple’s headquarters to London because the U.K.’s Financial Conduct Authority (FCA) does not see XRP as a security.