Ripple, the cross-border payment firm that oversees the distribution of XRP, is currently facing a lawsuit from the United States Securities and Exchange Commission (SEC), over the classification of the digital token XRP on whether it’s a security or virtual currency.
However, rather than scrutinizing Ripple over XRP sales such as the United States regulators, United Kingdom (UK) is providing regulatory clarity.
United Kingdom’s Government Document Portrays XRP as a Currency
According to a report published on 7th January 2020 by Her Majesty’s (HM) Treasury, the department of the Government of the UK responsible for developing and executing the government’s public finance and economic policy, XRP is not a security.
In the document titled “UK regulatory approach to crypto-assets and stablecoins: consultation and call for evidence,” the British authority states that digital currencies are useful in various ways, from trading digital collectibles to raising capital for new projects. The report also added that there is no intentionally agreed taxonomy or classification.
Back in 2019, the financial regulator of the United Kingdom, Financial Conduct Authority (FCA) published its “Guidance on Crypto-Assets,” which classifies tokens into E-money tokens, securities tokens, and unregulated tokens.
According to the statement, securities tokens have characteristics similar to a specific investment, such as a share or debt security, as defined in UK legislation.
Howbeit, according to HM Treasury, XRP does not fall under this category. The cryptocurrency rather belongs to the category of unregulated tokens, which can be further divided into utility tokens and exchange tokens.
In this regard, the UK authority states in its report as follows:
“Exchange tokens: tokens that are primarily used as a means of exchange – this includes widely known cryptoassets such as Bitcoin, Ether and XRP.”
Moreover, the HM Treasury noted that “many tokens can take a hybrid form and fall into different categories at different times.”
For instance, they may first be used to raise capital and later be primarily used as exchange tokens.
Why is SEC Scrutinizing XRP and Crypto-Assets?
The major reason why United States regulators are so determined to keep scrutinizing new innovations such as cryptocurrencies cannot be ascertained. While other countries are looking for ways to leverage the utilities embedded in digital currencies for the growth of their economies, U.S. regulators are coming up with rules targeted at deterring their growth and development.
For instance, XRP is created to serve as a bridge currency due to its transaction speed, scalability, and cost-efficiency. And it has obviously been serving its purpose from inception.
In conclusion, the world is going fully digital. So, any country (including United States) that refuses to accept this fact should be ready to lag behind.