What happens when a cryptocurrency once positioned as a regulatorfriendly alternative to bitcoin gets heat from regulators? Exchanges that trade XRP are about to find out.
U.S.based cryptocurrency exchanges have to consider whether to delist XRP in light of a Securities and Exchange Commission SEC lawsuit alleging it is an unregistered security issued by Ripple Labs to raise funds.
Chief among these exchanges is Coinbase, which, in addition to the normal considerations around listing XRP, is also seeking SEC approval to take its shares public and allow retail investors to trade them. If the SEC prevails in its lawsuit, XRP may be classified as a security, meaning under U.S. law entities offering it for trading must register as securities exchanges.
Its also possible an SEC victory would destroy XRPs value because the regulator wants to prevent Ripple from selling any more tokens, and for Ripple, CEO Brad Garlinghouse and Chairman Chris Larsen to disgorge their profits, pay prejudgement interest and pay civil penalties.
While some exchanges, market makers and funds have already begun delisting XRP or exiting positions and transactions with the cryptocurrency, it may not be a blackandwhite question for larger exchanges.
Anthony TuSekine, a partner at law firm Seward Kissel LLP, told CoinDesk that trading platforms like Coinbase are between a rock and a hard place.
They can continue to list XRP based on their previous analysis that XRP is not a security, with the…