Ripple’s SEC case is relevant to Ethereum’s position as a security token. Ripple requests past conversations to defend XRP as an unregistered security. The emails’ lack of XRP references casts doubt on Ripple’s Ethereum-based reasoning.
Particularly in light of Ethereum’s status as an accused security token, the background information revealed by the SEC’s complaint against Ripple is particularly intriguing.
In order to refute accusations that it offered XRP as an unregistered security, Ripple sought a court order requiring the SEC to make some old communications public.
Although Ripple obviously expects that what they asserted for Ethereum also applies to XRP, those emails only mentioned Ethereum and not XRP.
Ethereum was not deemed a security token in SEC communications
The emails, which were just made public, show that numerous SEC officials firmly believed that Ethereum could not be regarded as a security in 2018.
These emails support two assertions.
The first is that the notion that Ethereum was a security at the time proved to be highly nebulous and hence very weak. The second is that it turned out to be far more substantial, and so stronger, than the initial supposition that it was not.
It’s critical to remember that, despite the SEC’s role as the government body in charge of overseeing the US securities market, it lacks the authority to arbitrarily and unilaterally determine what securities should be treated as such and what shouldn’t.
The XRP issue actually required court intervention, and even after two and a half years of hearings, the court has not yet reached a decision.
It is important to point out that the parties, particularly Ripple, have taken a long time because of legal disputes that have thus far stopped the court from reaching a decision.
Furthermore, what was true for Ethereum in 2018 was not necessarily true for XRP, and because staking was introduced in 2022, it is even uncertain whether it is true for today.
The circumstance in 2018
The year 2018 saw a significant increase in the price of XRP, which even went as far as briefly outpacing Ethereum in terms of market value.
The big day for XRP was January 2018, as it lost a significant portion of the market value it had acquired since late 2017.
The need to regulate Ethereum does not clearly appear in the SEC’s communications from that year, and since the need to regulate XRP does not clearly emerge either, it is safe to assume that the SEC did not believe there was a genuine possibility that XRP was a security in 2018.
Not least of all because, aside from purely technological differences, the two cryptocurrencies at the time were not that different from one another.
Is Ethereum still not considered a security token, according to the SEC?
Therefore, there are two unanswered questions.
The first concern is the introduction of staking, presuming that the SEC did not view Ethereum as a security in 2018.
Is Ethereum a secure now that Proof-of-Stake will be implemented in 2022?
Many disagree, not the least of which is the fact that the actual staking is carried out independently on one’s own validator node.
Although there are some intermediaries that provide staking-as-a-service, which might be regarded as a type of investment contract (and hence a security), the Ethereum protocol is exempt from this.
Therefore, ETH might not be a security, but merely the staking-as-a-service provided by some intermediaries.
The second query relates to XRP because it has always relied on a Proof-of-Stake-like transaction validation method.
The issue is whether the SEC’s 2018 comments regarding Ethereum may actually be applied to XRP as well.
There are many questions surrounding this assertion, not the least of which is that XRP was produced and released to the market by a private firm, Ripple.
It is not a coincidence that the price of XRP has not increased recently.
In fact, the price of the 2018 SEC emails jumped from $0.51 to $0.56 shortly after the news of their release was announced, but it immediately dropped down to $0.51 after their actual release.
Later, it also decreased to $0.46 before significantly increasing once more to the current $0.49.
In other words, the market did not believe that Ripple’s action against the SEC was aided by the emails.
Amount paid for Ethereum
On the other hand, the price of ETH did not dramatically change after the announcement or after the emails were made public, maybe in part because the markets anticipated that these emails would lead to the conclusion that ETH was not regarded as a security in 2018.
The next day, it actually decreased from $1,740 to $1,630, but for other causes. In fact, it filled the whole gap within two days and reverted to almost $1,730.
Consider that it already reached $1,710 on February 2 this year, after dropping as low as $1,070 in November of last year.
The price of ETH has essentially been trading around the $1,700 level for four and a half months, although there have been ups and downs that have brought it as high as $2,100 and as low as $1,400.
Over the medium run, it continues to be a very volatile asset, albeit much less so than in the past. Additionally, over the past few months, it has been fluctuating in the short term much more modestly than in the past.