Information has recently emerged that suggests that Ripple’s XRP token is not a security. The Financial Crimes Enforcement Network signed an agreement with Ripple Inc. that allowed them to continue their sale of XRP in 2015. According to an agreement signed between FinCEN and the Securities and Exchanges Commission in 2006, information about examination and enforcement of the SEC’s norms will be shared between the two agencies.
In 2015, FinCEN, along with the US Attorney’s Office for the Northern District of California, assessed a $700,000 penalty against Ripple. This was keeping in view with Ripple violating the Bank Secrecy Act and acting as an unregistered Money Services Business. They also did not meet Anti-Money Laundering requirements. This was settled with an agreement.
The agreement mentions XRP as a “currency of the Ripple network”, effectively removing it from the position of being declared as a security. The agreement also states that “Any sale or transmission of XRP by Ripple Labs or any of its subsidiaries shall be conducted only through an entity registered with FinCEN”. This would realize Ripple Inc. as a Money Services Business, regulated by FinCEN.
While it is not an end-all solution to the securities-or-not debate propagated by the SEC, XRP holders can hope for a conclusion favorable to their cause. As FinCEN has the power to determine whether an asset is a currency and as a currency cannot be a security by definition, the question seems to be answered.
Since the settlement is between the Department of Justice and the company, it binds the US government. However, the settlement agreement drawn up by the Department of Justice includes a clause that states that the agreement does not “bind any other federal agencies, or any state, local or foreign law enforcement or regulatory agencies, or any other authorities.”. The settlement may still be used as fodder against the SEC in the lawsuit that Ripple is preparing for.
Richard Holland, the Director of the company behind Toast Wallet, said:
“The gov’t has to follow the rules of evidence. They can’t settle with prejudice on an agreed set of facts then later open a new case that contradicts those agreed facts. Everyone is bound to the rules of the court.”
Surprisingly, Ripple’s Chief Cryptographer, David Schwartz pitched into the debate, saying:
“At the time, I was worried that the settlement would damage our credibility with FIs. Ironically, many actually saw it as a positive for reasons like this.”
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Ripple’s initiative invests in Bolt Labs to improve secondary payment channels and expand interoperability
Ripple’s arm, Xpring which invests and incubates in companies and individuals which help improve the XRP ecosystem, invested in Bolt Labs. With the new investment, Xpring hopes to develop solutions that will help improve the security of secondary payment channels and increase the interoperability by integrating with the ILP.
Bolt is a private, off-chain scaling solution which was built on top of Z-cash, a privacy-focused cryptocurrency, has attracted more than a few well-known investors in the crypto-space and Ripple’s Xpring is one among them. In a blog, Bolt Labs said that their solution will focus not only on ZCash but also other publicly available cryptocurrencies that do not have inherent on-chain privacy features.
It also stated:
“The potential for these implementations to be networked together with technologies like Interledger opens the potential further for cross-chain interactions with these privacy guarantees baked in.”
The above statement suggests that they might have a “potential” implementation for these on Interledger Protocol [ILP]. ILP was created at Ripple developed by the Interledger W3C Community Group. ILP aims at connecting two different blockchains, to integrate two different ledgers and have seamless operations between them.
This would vastly benefit the payments industry, which is facing a revolution at the hands of a nascent technology like blockchain. Ripple, a payments provider, which is leveraging cryptocurrency and blockchain to facilitate faster payments, would benefit largely from this partnership. In addition, this could also signify a potential development on the XRP Ledger and its on-chain/off-chain privacy and the currency, XRP.
A Twitter user @XRPCentre tweeted:
“If the solutions being developed by the company are able to improve the privacy of the ILP transactions, they would also be enhancing the privacy of XRP/ILP payments, which is a very demanded feature…. It’s all about interoperability and destroying network effects. If ILP succeeds in being the best protocol for cross-protocol/ledger transactions, you’d naturally search for the best asset therein.”
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