XRP Is Currently Not a Security, but It’s Not That Simple: Cardano Founder

The creator of Cardano (ADA), Charles Hoskinson, has weighed in on the U.S. Securities and Exchange Commission’s lawsuit against Ripple Labs over the sale of the XRP token, which the agency asserts is an unregistered security.

Over several ask-me-anything videos, Hoskinson said that regulating cryptoassets isn’t simple as tokens are dynamic and hard to categorize. Per his words, cryptoassets are the “stem cells of finance.”

The problem with cryptocurrencies is they do everything and nothing. And some days, they look like securities, some days they look like commodities, some days they look like currencies and some days they look like something else entirely.

Hoskinson added that a stem cell is “like a supercell and basically, it can become a heart cell or a brain cell or so forth.” Regulators, he added, like “buckets” and don’t see stem cells, but see heart or brain cells.

Hoskinson said, as the Daily Hodl reports, that he does not believe XRP is currently a security, although its status may have been different years ago. The cryptocurrency’s current use and level of decentralization, he said, makes him believe XRP is currently not a security, but a “fair argument could be made” it was a security “at some point.”

He added:

There is certainly security-like behavior and it’s deeply puzzling to me, for example, in the age of smart contracts why an actual real company would be responsible for distribution of a token.

While the XRP sales are “problematic,” the case is “fundamentally different than the SEC’s actions against Block.one over the sale of EOS, as then both had an argument to “save face.” While the SEC sued Block.one for the sale of EOS as an ERC-20 token, it did not take action based on the EOS in distribution today.

For XRP there’s “no escape valve” Ripple can use, and the SEC is acting as if XRP was a security since 2012. Hoskinson added:

It means that all that behavior that they did would be subject to securities laws and disclosure, insider trading regulations, all these types of things. And they’ll connect those dots accordingly.

The founder of Cardano doesn’t believe that the lawsuit will, either way, have a domino effect on the crypto industry if XRP is ultimately declared a security. Instead, the “bight fight” he foresees in 2021 will be on whether proof-of-stake makes a cryptocurrency a security or not. He believes that the answer is “no.”

Featured image via Pixabay.

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