In another win for Ripple, the judge in the SEC v Ripple case ordered Ripple to pay a $125 million fine rather than the $2 billion sought by the SEC. Judge Torres made a controversial ruling last July, finding that Ripple’s sales of the XRP token were securities when sold to institutions but not when sold programmatically to retail investors via exchanges.
Yesterday’s ruling related to the penalty for Ripple selling securities to institutions while failing to register the securities. However, the judge also imposed an injunction preventing ongoing sales of XRP without registering as a security. This will impact Ripple’s On Demand Liquidity (ODL) solution. While it’s not Ripple’s sole business model, ODL is a key rationale behind the utility of XRP. There are several potential workarounds, especially given most ODL sales are outside the United States.
ODL is used for cross border payments and reduces the need to hold foreign currencies. A money transfer agent sending Brazilian Real to India would convert Brazilian reals into XRP, and send the XRP to India. On the incoming side, the recipient would convert XRP to rupees. Here, XRP is held for a short period, and some would argue that means the purpose of the sales is not as an investment.
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