'Unclear' whether XRP is a commodity or a security - CFTC Chair
Definition dispute over Ripple cryptocurrency continues
The Chair of the US Commodity Futures Trading Commission (CFTC), Heath Tarbert, has observed this week that it is unclear whether XRP is a commodity or a security.
Speaking to American news outlet Cheddar, Tarbert stated: “It’s unclear. Stay tuned I’d say. Part of the issue is our jurisdiction we share with the SEC [Securities and Exchange Commission]. If it’s a security, it falls under their jurisdiction. If it’s a commodity, it falls under ours.”
While it may have lost 95 per cent of its value since its peak in 2017, the decentralised cryptocurrency established by the payment and settlement firm Ripple Labs in 2012 is still the third-largest cryptocurrency in the world.
Ripple Labs itself is now worth more than $10bn (£7.6bn, €8.9bn) and is partnering with firms across the globe to bring its technology and expertise to heretofore untapped markets. At the start of the week the company announced that it would partner with the major global money transfer and payments firm MoneyGram in order to expand into India.
Ripple's Brad Garlinghouse has vehemently argued that XRP is not a security, telling CNBC last week: I think it’s very clear that XRP is not a security. It exists independently of the company, Ripple. If Ripple, the company, shut down tomorrow the XRP ecosystem would continue to exist. It’s an independent open source technology.”
Garlinghouse observed that whereas some digital assets are traded as securities, as though one was buying and selling a company’s stock for profit, those investing in XRP are doing so based on the hope of an increase in the XRP ecosystem’s network effect. He added: “XRP has a lot of utility, to me that’s very different to what a security looks like, and ultimately we’ll find that conclusion.”
If regulators buy Garlinghouse’s argument then XRP will likely be regulated by the CFTC as a commodity, joining Bitcoin (BTC) and Ether (ETH). The regulators chairman concluded his interview by stressing his cooperation with the SEC over the last year “to really think about which falls in what box.”
The crypto community will closely monitor such future decisions. Ripple Labs and its executives are still facing a major lawsuit from a group of XRP investors who claim that the company violated state and federal securities laws. Although Garlinghouse recently stated that: “Whether or not XRP is a security or not isn’t going to be dictated by one lawsuit,” the CEO would surely prefer XRP’s classification as a commodity.