Christopher Giancarlo, former chairman of the US Commodity Futures Trading Commission, co-authored an article that aims to clear the air about whether XRP should be regulated as a security.
Verdict from 'Crypto Dad'
In his article Cryptocurrencies and US securities laws: beyond bitcoin and ether for International Financial Law Review journal, Mr. Giancarlo put forward a number of arguments to prove that XRP digital assets have no indication of being securities. First of all, XRP doesn't represent a sort of 'investment contract'.
At the same time, in accordance with the Securities and Exchange Commission report on The DAO Case, cryptocurrencies are investment contracts. XRP doesn't satisfy all requirements of the Howey test, which is designed to identify the instruments that should be regulated as securities.
The storage of XRP tokens doesn't imply the investment of money into the common enterprise. Also, XRP holders shouldn't expect profits derived from the development and marketing aspects of Ripple, Inc.
The last fact was particularly emphasized by Crypto Dad as he believes that market participants understand that:
The separation between XRP and Ripple is evidenced by the fact that the price of XRP is generally unresponsive to developments regarding Ripple and instead follows the movements of other cryptocurrencies.
XRP decentralization is sufficient to avoid security status
Mr. Giancarlo remembered the position of SEC division of corporate finance director, William Hinman, who treats Bitcoin (BTC) and Ethereum (ETH) as sufficiently decentralized systems that shouldn't be regulated as securities.
For Crypto Dad, XRP is much more decentralized. This aspect is enhanced by the no-ICO essence of the XRP token, which has been fully operational since 2012 when the XRP Ledger was launched.
XRP is broadly accepted as a utility token for liquidity. Thus, Mr. Giancarlo suggests it should be treated as 'a currency or a medium of exchange' but not as security.
Christopher Giancarlo served as the thirteenth CFTC Chairman in 2017-2019. Prior to this, he served as the commissioner for this body for three years.