The US Securities and Exchange Commission (SEC) has directed its attention towards Ripple’s proposed stablecoin in its most recent court filing against the company. In a redacted remedies reply brief filed on May 7, the SEC referred to the planned token as an “unregistered crypto asset.” Interestingly, the regulator did not explicitly mention a “stablecoin” in its filing, but rather cited Ripple’s press release from April 4, which announced the issuance of a dollar-pegged digital asset. Since then, Ripple has not provided any further details about the token.
In addition, the documents argue that the proposed stablecoin serves as evidence that Ripple will continue to engage in unregulated activities if a permanent injunction is not granted. The SEC contends that courts typically grant injunctions in such cases because they indicate a higher likelihood of repetition. The SEC also points out that Ripple plans to issue a new unregistered crypto asset, and that the court has already ruled that Ripple’s ODL Institutional Sales up to 2020 violated the law.
The SEC has consistently claimed that Ripple’s primary business revolves around the unregistered institutional sales of XRP, and that it will continue to do so unless an injunction is granted. The SEC argues that Ripple’s ongoing business puts it in a position where violations can be anticipated. Finbold has been monitoring and reporting on the company’s monthly sell-offs, which follow a pattern and are publicly available data. Ripple unlocks 1 billion XRP from escrows under its control on the first day of every month, and later reserves around 20% of the unlocked amount for its monthly sales at strategic moments.
The SEC is also seeking to impose a hefty penalty on Ripple as a deterrent to the company and other copycats. It is seeking fines of nearly $2 billion from Ripple, but the crypto firm disputes this demand and proposes a civil penalty not exceeding $10 million. Ripple has been selling over $100 million in XRP monthly for years, which means that each month’s sell-off is over 10 times higher than Ripple’s proposed civil penalty.
Ripple’s chief legal officer, Stuart Alderoty, has criticized the SEC’s filing as baseless, stating that it is another example of the regulator’s failure to apply the law. Alderoty also highlighted the SEC’s disregard for crypto frameworks in other jurisdictions. The SEC disagrees with Ripple’s assurance that it would not violate US securities law because it holds licenses in other jurisdictions, describing this argument as absurd.
As of now, XRP is trading at $0.52 per token, down 2.76% in the last 24 hours. It is possible that the SEC’s recent filing could create additional selling pressure from Ripple’s holdings and other cryptocurrency investors. In conclusion, the legal battle between Ripple and the SEC may delay the launch of the announced stablecoin, leaving XRP investors and Ripple supporters in anticipation. Traders must proceed with caution due to the increased regulatory scrutiny from US authorities.
