Christopher Giancarlo. Source: CNBC
The former head of the U.S. Commodity Futures Trading Commission J. Christopher Giancarlo says XRP is not a security. The fourth-largest crypto by market capitalization continues to split opinions in the cryptocurrency field, owing largely to Ripple controlling the main bulk of its supply.
In a report published on Wednesday (June 17, 2020), Giancarlo affectionately dubbed “Crypto Dad,” argued that XRP does not constitute an investment contract. Explaining his stance, the former CFTC chief remarked:
“XRP cannot be an investment contract as there is no contract or arrangement to speak of between Ripple and the overwhelming majority of XRP holders. To the contrary, the contracts that Ripple has entered into explicitly exclude general XRP holders as third-party beneficiaries.”
According to Giancarlo, both and XRP and Ripple’s operations do not meet up with criteria enshrined in the four prongs of the Howey Test. For Giancarlo, Ripple has not marketed XRP as an investment product but rather as a bridge currency for interbank settlement.
The ex-CFTC chair also touched on the Ripple XRP ownership debate likening the blockchain firm’s control of the majority of tokens to Bitcoin (BTC) miners having significant BTC holdings. Each quarter, Ripple transfers 1 billion XRP from its escrow account.
For Giancarlo, XRP is a utility token that provides liquidity for interbank settlement. Ripple chief Brad Garlinghouse has consistently described XRP as a bridge currency that will remove the need for correspondent banking relationships, thus providing seamless cross-border remittance capabilities.
While Giancarlo has a history of positive sentiments towards cryptos even as head of the CFTC, it is important to note that he currently works as a senior counsel at Willkie Farr & Gallagher, a firm with close ties to Ripple.
The U.S. Securities and Exchange Commission (SEC) has, in the past, come out to state that Bitcoin and Ethereum (ETH) are not securities. The Commission has also maintained that initial coin offering (ICO) tokens are likely to be securities.
For XRP, the final decision is yet to emerge, with Ripple being the subject of multiple lawsuits from aggrieved investors. As previously reported by CryptoPotato, XRP investor Ryan Coffey filed a lawsuit accusing the company of selling unregistered securities.
The situation with XRP also underscores the need for clear-cut crypto regulations in the U.S., a point made by numerous stakeholders in the American crypto scene. Several pundits say the patchwork of State and Federal laws are hampering the development of the country’s crypto and blockchain industry.
A couple of bills are currently before the U.S. Congress that may help to clarify the state of crypto regulations in the country. The Token Taxonomy Act seeks to exempt cryptos from securities laws while establishing a ‘de minimis’ exemption for crypto taxes below a certain profit threshold.
Another legislative proposal is the Cryptocurrency Act of 2020 that aims to simplify the classification of digital assets and streamline the activities of Federal agencies like the SEC and CFTC concerning cryptocurrencies.