Now the fourth-largest cryptoasset by market capitalization, XRP, has started getting suspended by multiple platforms following a lawsuit filed by the US Securities and Exchange Commission (SEC) against major US-based blockchain company Ripple. (Updated at 16:42 UTC with an announcement from Bitwise and new price data.)
The most recent example is Bitwise Asset Management, a US-based major crypto fund manager. It announced that its USD 242m Bitwise 10 Crypto Index Fund has liquidated its position in XRP.
"The Bitwise 10 Crypto Index Fund does not invest in assets that are reasonably likely to be deemed securities under federal or state securities laws. Bitwise’s decision to liquidate its position in XRP was based on consideration of new public information from the SEC’s complaint," they said, adding that prior to the sale of the asset on December 22, 2020, XRP was approximately 3.8% of the fund. After the fund liquidated its position in XRP it reinvested the proceeds in other portfolio assets.
Meanwhile, some small exchanges have started notifying their users of certain changes regarding the trading of Ripple-affiliated XRP. Chicago-based digital asset exchange Beaxy Exchange said that as the SEC has charged Ripple with conducting an unregistered security sale, they have halted trading for XRP "pending further news," while "XRP withdrawals will remain enabled until further notice."
However, at the time of writing, the 24-hour trading volume at this exchange stands at USD 90,000, while XRP’s trading volume is only USD 11, per Coinpaprika.com data.
In either case, they’re not alone.
"We have suspended all XRP payment in and trading services on the OSL platform, effective immediately and until further notice," stated today this digital asset platform licensed by the Securities and Futures Commission (SFC) of Hong Kong. Furthermore, "CrossTower made the decision to remove XRP from its US-based trading platform – effective immediately," said the exchange and a member of the Coinbase-led Crypto Rating Council in their December 22 announcement.
As reported, the SEC filed an expected action against Ripple and two of its executives, Christian Larsen and Brad Garlinghouse, claiming that they raised over USD 1.3bn through an unregistered, ongoing digital asset securities offering, while "Larsen and Garlinghouse also effected personal unregistered sales of XRP totaling approximately USD 600 million."
Some have reacted negatively to the above-mentioned announcements by the exhanges, claiming, for example, that this is damaging to investors and that it’s too early to make moves before any sort of ruling. Beaxy co-president Nick Murphy argued in return that it’s the exchange’s "responsibility to be proactive on things like this," and that "users can still withdrawal, we are just halting trading until further clarification comes out."
However, it seems that the Cryptoverse is expecting more exchanges to follow with announcements of their own about changes in trading and possible delistings, with some arguing it could be a coordinated effort, particularly given that the exchanges stand to lose money as well. Still, "any crypto exchange who doesn’t delist XRP this week is out of their mind" and "crazy to list it without a licence" should the SEC deem it a security, wrote Bruce Fenton, CEO of Chainstone Labs, with INX Limited‘s Alan Silbert agreeing.
This is quite bad for Ripple. Not exactly worst case, that'd be securities fraud, but close.
XRP is basically useless if deemed a security. Alleging violations through present day is a kill shot. Charging individual executives is remarkable.
This is the SEC playing hardball.
— Jake Chervinsky (@jchervinsky) December 22, 2020
While critics are stating that "small exchange delistings really don’t matter," even if that were the case, the next to come might be the giants in the industry.
Meanwhile, Messari CEO Ryan Selkis tweeted that "XRP holders are completely f*cked. I’d expect sub [USD] 0.10 by mid-Jan." While Ripple might "get away with the ‘securities’ element" after a battle, they’ll find their ODL (On-Demand Liquidity), liquidity partners, and distribution dead, Selkis argued — particularly at this time when institutions are turning to bitcoin (BTC) and stablecoins.
To give you a sense of who stands to lose business if XRP is delisted from major exchanges, XRP is:
+ 18% of Bitstamp volumes
+ 8% of Coinbase volumes
+ 5.5% of Kraken volumes
+ Only 4% of Binance volumes
That's just the major Western venues, of course.
— Ryan Bitcorn Selkis (@twobitidiot) December 23, 2020
However, OKEx CEO Jay Hao argued that "declaring XRP a security may allow Ripple to list on traditional stock exchanges and potentially open it up to a far wider market."
@J0E007 But Joe, banks have been committing fraud in the many many billions per decade, for many decades. All they… https://t.co/0G2vGNXBU1
— Crypto (@Crypto7286744)
Meanwhile, XRP has been dropping since the news of the lawsuit came out. At the time of writing (16:38 UTC), XRP, the worst performing coin among the top 270 cryptoassets by market capitalization today, trades at USD 0.32 and is down by 31% in a day and 39% in a week. The price dropped by 40% in a month, trimming its gains over the past 12 months to less than 69%.
It has also dropped to the fourth place by market capitalization (USD 14.6bn), having previously occupied the third.
Look who's bouncing from the green box 🙂
Anyone telling you to buy into an asset that's going into a law suit with the SEC and serious risk of delisting, should be unfollowed imo…
That's not caring about followers, but hopium their bags get pumped pic.twitter.com/uRE8ujN1FG
— Crypto_Ed_NL (@Crypto_Ed_NL) December 23, 2020
It also remains to be seen how Ripple partners will be affected by the lawsuit. MoneyGram will keep an eye on the situation reported Coindesk, and it "has continued to utilize its other traditional FX trading counterparties throughout the term of the agreement with Ripple."
Find more comments about the case here.