Ripple has partnered with hundreds of banks and financial institutions over the years and has included them in its network. It even formed a joint venture with Japan’s leading finance company SBI Holdings to promote its products in the region.
Similar to any other decentralized ecosystem, Ripple’s products are fueled by the native XRP token, a “digital asset built for payments”.
In addition, although XRP is marketed as a cryptocurrency, a large part of the crypto community believes that the token is too central to be a cryptocurrency. As it is known, Ripple even controls the XRP supply.
Another heated debate claims that XRP is a security, not a currency. This claim came to the fore when the US financial market regulator officially sued Ripple for selling unregistered securities on December 23. The complaint also includes Ripple Labs CEO Brad Garlinghouse and executive chair Chris Larsen. In a nutshell, “At least from 2013 to the present, Defendants have sold 14.6 billion units of digital asset securities called ‘XRP’ for cash or another cost in excess of $ 1.38 billion to finance Ripple’s operations and enrich Larsen and Garlinghouse. . ” was the subject of the lawsuit. He said targeting the Ripple regulator has hurt “numerous innocent XRP retailers who are not affiliated with Ripple.”
Ripple began to experience the impact of the lawsuit within a few hours after the lawsuit was announced by the SEC. Crypto exchanges are starting to remove the potential security XRP, and the list of these cryptocurrency companies is growing very rapidly.
“XRP, a digital currency associated with Ripple, is seen as a security,” said Maria Stankevich, chief business development officer of EXMO UK, in a statement.
Many crypto exchanges, including Coinbase, OKCoin, Bittrex, and Bitstamp, have decided to suspend XRP trading. CrossTower, a small crypto exchange, removed the token from the list after Garlinghouse warned of a possible lawsuit against Ripple. This delisting marathon seriously impacted the XRP price: it was trading at around $ 0.52 before the case was announced, and is currently trading at about $ 0.20, meaning it has lost more than 60 percent of its value.
However, many global exchanges such as Binance and Huobi still offer XRP trading. “Exchanges outside the US may still choose to trade,” said Phil Liu, Arca’s chief legal officer. However, if Ripple cannot continue to pay listing fees to these exchanges, there won’t be much incentive to trade coins ”. He also pointed to the SEC’s impact on other international regulators.
While the case itself is a depressing factor for Ripple, the company’s business and its dependence on the token for raising funds is sad. “XRP essentially accounted for most of Ripple’s revenue,” said Aaron Kaplan, co-founder and CEO of Prometheum. “Without XRP treasure, Ripple will have to match transactions to be more compatible with non-XRP related business activities.” used the expressions. Indeed, one of Ripple’s important services, on-demand liquidity (ODL) is dependent on XRP as an intermediate currency for cross-border money transfers. “Insufficient liquidity will increase the volatility of XRP and bring unpleasant experiences such as a major shift to Ripple’s partners,” Xu warned.
Additionally, Ripple is heavily dependent on XRP for funds. The SEC case specifically pointed to the $ 1.38 billion the company has collected over the years. “If the company cannot raise money by selling XRP and its other products are not profitable, the company could go bankrupt by the end of 2021,” Liu said.
As a result, Ripple is very dependent on XRP, and falling token prices are narrowing its chances of survival.