As per the recent court proceedings, the securities and exchange commission of the US, also called as US SEC is expected to encounter defeat in its file against the cryptocurrency XRP for its status as the security option. The case has been on the verge of verdicts on the side of Ripple.
The recent verdict of Hinman documents transfers orders to the Ripple also proves the limelight of victory to Ripple. After these orders, the next view can be a contradiction to the Howey Test by the US SEC. The Howey Test is considered the basis of confirming any currency as an investment contract and so the security option in the monetary terms.
What is the case between SEC and Ripple?
In December 2020, the US SEC filed a lawsuit against Ripple and its underlined cryptocurrency XRP, which are traded since 2013 as a type of investments contracts and so they are security-backed asset options too for investments.
As per Ripple, this is not the reality, and just like bitcoins or Ethereum are not considered investment contracts and so the Ripple cryptocurrency XRP in similar terms should not be considered as the security option by the SEC and all the other regulatory organizations in the US.
What is SEC?
The US SEC is considered an independent body in the US. The organization is responsible for maintaining fair market practices by all the private companies amongst themselves in the US. In this manner, the organization works against all the derogatory market practices like the individual company monopolies in the US.
What are the Ripple and XRP?
The Ripple is the settlements systems that work on the principle of the real-time aspects of the payments process. The Ripple works as the currency exchange and the remittances network in the US. This rubble is run by the US fintech company Ripple labs.
The organization wants to work on the future of the payment process as a secure instant and transparent network of money circulation. The cryptocurrency XRP is issued under this initiative by the Ripple lab.
What is Howey Test?
The case between SEC v. W. J. Howey Co. of (1946) is noted as the case is the base for evaluating any transactions as investment contracts or not. After these evaluations if the transaction passes the parameters of the investment contract its considered security and if it is not able to pass its parameters of the investments contract screening process its not considered security in all the moments of transition in the economy.