Good news for Ripple Labs and its flagship XRP cryptocurrency: The United States Securities and Exchange Commission has decided to issue “No-Action” letters for digital currencies that can prove they can be used in a viable manner to settle financial transactions. In essence, a “No-Action” letter indicates that the SEC has deemed a financial instrument to be in compliance, thereby foregoing legal action taken against managing entities. In the case of XRP, the token has been widely used in live projects involving international money transfers such as remittances.
Ripple’s Financial Capabilities Keeps Regulators Away, For Now
The aforementioned comments by the SEC were made during the FinHub Forum in the District of Columbia, a historic event insofar as being the first time the federal regulator has formally addressed blockchain issues in a public conference. Although the mood was mostly positive at the FinHub Forum, there was an uncomfortable background issue related to Circle, the cryptocurrency division of investment banking firm Goldman Sachs. Circle recently laid off a few key employees because the company is feeling the effects of regulatory uncertainty.
Since Ripple is a token backed by a robust business team, it has been able to achieve substantial circulation thanks to projects conducted with established financial institutions; however, the company may have been moving too fast and ahead of SEC regulators. In other words, Ripple has encountered situations whereby its business development team could have faced enforcement action by the SEC. One aspect of Ripple that could have been called into question is that it is a centralized currency, which means that regulators may see it as an investment security that requires registration. Nonetheless, XRP has demonstrated financial utility and functionality, thus enjoying the benefit of “No-Action” letters for the time being.
The Future of the SEC’s Stance on Cryptocurrencies
The SEC has taken a strong stance against some initial coin offerings such as Airfox and Paragon, two digital currencies that were forced to issue refunds to potential investors because their ICO operations were considered to fall under the label of unregistered securities. This situation does not seem to apply to Ripple.
As for XRP investors, this SEC development will likely result in a positive outlook. Thus far in 2019, XRP traders have seen solid movement towards the XRP/USD target price of $0.50. In the middle of May, XRP/USD touched $0.45, the highest level of the year. With XRP trading in a range from $0.43 to $0.45, there is a good potential of reaching $0.50 over the next few weeks, thus launching another target of reaching $1.00 before the end of the year.