The price of the third-largest cryptocurrency by market capitalization, XRP, has plunged over 30% as various cryptocurrency exchanges started delisting the cryptocurrency in reaction to a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against ripple.
Cryptocurrency exchanges OSL, Beaxy, and CrossTower have already either temporarily stopped trading or delist XRP. Hailey Lennon, a partner at Anderson Kill, noted that exchanges that list XRP may be at risk if the cryptoasset is deemed a security, which could imply more trading platforms will delist it.
The SEC’s lawsuit against Ripple alleges the firm paid cryptocurrency exchanges to permit “the buying and selling of XRP” on their platforms. Per The Wall Street Journal, at the heart of the lawsuit is whether XRP is a security that should have been registered with the regulator or not.
As Ripple did not register XRP as a securities offering, the regulator argues investors did not have adequate information, and as such the defendants had an unfair advantage. The lawsuit alleges:
Ripple created an information vacuum such that Ripple and the two insiders with the most control over it—Larsen and Garlinghouse—could sell XRP into a market that possessed only the information [the] defendants chose to share about Ripple and XRP.
XRP, the agency said, has existed almost wholly as a speculative asset and not a currency, with it being marketed and sold as a speculative asset. The regulator wants the defendants to pay back some of their gains and financial penalties, and to prohibit them from selling cryptoasset securities
Brad Garlinghouse, the CEO of Ripple, has made it clear the firm will fight the lawsuit. The price of XRP has, meanwhile, been suffering as investors are seemingly dumping their tokens. In the last 24-hour period it dropped well over 35% from about $0.49 to $0.31 at press time.
The cryptocurrency’s price, it’s worth noting, surged earlier this year thanks to Flare’s Spark (FLR) token airdrop. The tokens are being distributed at a ratio of 1.0073 FLR per each XRP token investors hold, with over 45.8 billion tokens being airdropped to users in total.
The Flare Network integrates the Ethereum Virtual Machine (EVM) and does not derive safety from a token. It will essentially bring Ethereum’s decentralized applications, smart contracts, and decentralized finance into the XRP ecosystem. It’s supported by Ripple’s investment arm RippleX, formerly Xpring.
On social media, traders have revealed they believe XRP is now a risky asset, at least until its legal conflict with the SEC is resolved. Alex Saunders, a popular cryptocurrency trader, noted that there are a “plethora of coins offering enormous upside.”
Per Saunders, it’s “ludicrous to emotionally attach yourself to $XRP now they are being sued by the SEC. Exchanges will be delisting & financial services industry won’t dare touch it until resolved. Good investors admit things changed & move on.”
Featured image via Pixabay.