Coinbase today reported that it will halt XRP transactions after Ripple Labs was accused by the US Securities and Exchange Commission of collecting $1.3 billion on unregistered sales of securities.
Coinbase’s Position on XRP
After the SEC revealed the complaint, the XRP coin has fallen in price by 42 percent, from $0.47 to $0.27. Since the news, the coin has already fallen in value by 8 percent to $0.25.
In a blog post, Coinbase stated:
In light of the SEC’s lawsuit against Ripple Labs, Inc, we have made the decision to suspend the XRP trading pairs on our platform. Trading will move into limit only starting December 28, 2020 at 2:30 PM PST, and will be fully suspended on Tuesday, January 19, 2021 at 10 a.m. Pacific Standard Time*. We will provide additional updates, if any, through the Coinbase Support Twitter account, including if there are any changes to timing.
The trading suspension will not affect customers’ access to XRP wallets which will remain available for deposit and withdraw functionality after the trading suspension. Further, customers will remain eligible for the previously announced Spark airdrop (subject to approval in certain jurisdictions), and we will continue to support XRP on Coinbase Custody and Coinbase Wallet.
Coinbase remains committed to being the most trusted platform for trading cryptocurrency. We strive to provide our customers with access to a broad set of assets, all of which are evaluated against our Digital Asset Framework to assess factors like security, compliance, and the project’s alignment with our mission of creating an open financial system for the world. We take seriously any decision to change our customers’ access to one of those assets.
We will continue to monitor legal developments related to XRP and update our customers as more information becomes available.
Coinbase enters the growing list of cryptocurrency exchanges which, after Bitstamp, Beaxy, CrossTower, OKCoin and OSL, have suspended XRP trading. XRP is still open for trade on Binance, Kraken, and Huobi.
Several funds have avoided investing in and market-making XRP after reports of the SEC case came to light. Two of the biggest crypto trading desks, Jump Trading, and Galaxy Digital, have stopped making XRP markets, and Bitwise has liquidated all XRP from its portfolio. B2C2 is the last market maker who interrupted XRP trading.
Reasons Behind the Suit
The SEC’s complaint claims that Ripple has earned $1.3 billion since 2013 by unregistered sales of securities. In escrow wallets, Ripple has 55 billion XRP, which it offers every so often to hold the XRP price afloat.
The suit names Christian Larsen, co-founder of Ripple, and Brad Garlinghouse, CEO, as defendants. The SEC’s biggest problem named in the suit is that none are clear what XRP really is. The SEC argues that XRP is a security and that it should be treated as such.
That ensures that before anybody invested, Ripple’s previous CEO and current CEO could have been liable for sharing a range of additional details needed to access XRP’s risks.
Ripple claims the contrary. XRP, in Ripple’s view, is a currency and thus would not come within the SEC’s authority. Check out my colleague Liz Lopatto’s piece for details about why what is called XRP matters.
Coinbase is the highest-profile exchange to suspend XRP, however identical actions have been taken by other exchanges such as Bitstamp and OK Coin after the SEC’s legal action. The SEC has now changed the short-term future of XRP with the clear declaration of a complaint.