2 years, 6 months, and 6 days - that's the length of time it took to resolve the SEC case against Ripple, the crypto company from San Francisco. It was a landmark day when this modest company outsmarted a US government agency, burning through an astronomical sum to prove their innocence. The ripple effect? Pun intended.
Contrary to the speculations of most - barring the die-hard XRP enthusiasts - the SEC stumbled. The regulatory agency, known for its aggressive tactics and flawless track record, tasted defeat. Ripple danced to a different rhythm. It was a quintessential David versus Goliath tale, a showdown of right versus wrong.
The verdict? XRP is not a security. Bitcoin and Ethereum might have the SEC's and CFTC's blessings as commodities, but XRP now enjoys a unique distinction. It's the only one with legal clarity, etched in the books of law. For Ripple's Chairman, Chris Larsen, and CEO, Brad Garlinghouse, their XRP sales have been vindicated. However, the SEC managed to save face when the court ruled Ripple's early institutional sales of XRP as securities. But the real implications of the ruling will only reveal themselves over the next 60 days, as Ripple and the SEC grapple with the finer points of the judgement.
Judge Torres, the presiding authority, was meticulous and incisive. Ripple received more than what they had bargained for, a victory that, according to them, was a triumph for the entire industry. Even while pitted against a tainted division of the government, Ripple remained confident of being on the right side of the law and history (as Brad Garlinghouse put it). And they believed it was a fight worth every penny.
For almost three years, I've penned my thoughts on Ripple and XRP, maintaining throughout that Ripple would prevail. Keen readers can delve into my previous articles to understand my stand.
While analyzing a case involves considering numerous factors, two distinct elements reaffirmed my conviction in Ripple's success. First was Judge Torres' refusal to exclude independent attorney John Deaton, despite the SEC's resistance. His appointment as Amicus Curiae made a significant difference to the case's outcome. Second was Judge Torres' insistence on publicizing Bill Hinman's emails. The SEC's desperate attempts to prevent this fell on deaf ears. These emails offered a glimpse into the SEC's hypocritical operations.
The judgement could not have arrived at a better time. The SEC's strategy of ruling by enforcement is now under scrutiny, potentially providing relief to several other crypto companies under SEC's radar. Congressman Tom Emmer, a vocal critic of the SEC, hailed the ruling, encouraging his peers to "make some laws now."
The SEC's failure to engage constructively with companies and nurture an innovative environment while protecting market participants has already cost the country billions if not trillions.
Ripple's victory will have far-reaching consequences. Currently, Ripple is the only crypto company with official legal regulatory clarity among nearly 23,000 others. This ruling positions XRP favourably for accumulation by companies such as BlackRock, Fidelity, Vanguard, Citadel, Deutsche Bank, Charles Schwab, and others planning to launch crypto ETFs and exchanges. Post-verdict, XRP's price action propelled it to the fourth-largest market cap crypto globally, leading US exchanges like Coinbase and Kraken to relist XRP.
Timed perfectly with the introduction of "FedNow" on July 20th - a project with Ripple's partners - this ruling could revolutionize domestic payments. This change could see all 4400 US banks and 10,000 other financial institutions join the network, rendering cheque books obsolete and promoting 24/7 banking. As cross-border transactions become commonplace, XRP is poised to play a major role. The introduction of FedNow sets the stage for XRP's future.
The journey of payment evolution I've witnessed is nothing short of extraordinary. A back office treasury clerk in the 70s, I witnessed the days of delayed responses for foreign exchange prices and the concept of "Thursday dollars" in the 80s. It has been a long road to real-time payments with XRP.
Ripple's victory is a testament to the inevitable change in the banking industry. The SEC case was merely a futile attempt by incumbent banks to resist disruption. While initial resistance is expected, embracing change is the only way to survive. With Ripple's products and services, Bank of America, Ripple's partner, has a competitive edge, possibly influencing others to follow suit.
Ripple has already garnered international support from governments, banks, and organizations like the IMF, World Bank, BIS, and World Economic Forum. The age of instantaneous settlements in interbank foreign exchange is upon us, with Ripple leading the charge.
Digital assets need to focus on utility, regulatory clarity, and institutional adoption. We've seen the utility of XRP; now we have regulatory clarity. With giants like Larry Fink openly endorsing digital assets, the likes of SEC Chairman Gary Gensler and Elizabeth Warren are out of their depth.
The era of digital asset adoption is just beginning - and it's going to be monumental. The future belongs to those who select the right projects and hold onto them (HODL). Let's buckle up for this exhilarating ride.
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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office, and a hedge fund.