The lawyer told why XRP cannot be classified as securities

Many people know about the position of the US Securities and Exchange Commission in the direction of cryptocurrency assets. Gary Gensler, Chairman of the SEC, has repeatedly stated that cryptocurrency assets are nothing but securities and their regulation should be exactly the same as traditional securities.

The digital asset community, as well as various experts, assure him that he is wrong, but Gensler's persistence in this regard knows no bounds. The head of Ripple, which is being sued by the SEC, Brad Garlinghouse, said that the US Securities and Exchange Commission may understand the difference between cryptocurrencies and securities, but they simply do not want to do their job and draw up a set of rules by which digital assets will be regulated.

John Deaton, a lawyer dealing with issues of cryptocurrency assets, joined the number of adherents of this opinion. According to Deaton, the Ripple XRP token is indeed a security at the moment.

He backed up his opinion with a quote from a provision of the US law on corporate finance, which was adopted in 2018. This provision states that a digital asset is just a code, but the way promoters sell it to people as an investment in the development of an enterprise can be a security.

However, although digital assets, according to the above, may fit the description of securities, this still does not apply to the XRP token. The reason for this conclusion was the intentions of investors investing in XRP. According to John Deaton, a lot of people are putting their money into Ripple in order to install the TrustLine application with the XRP registry, which allows them to implement token transfers and receive wages through BitPay and other providers.

Consequently, most XRP investors use this token not as a security, but as an alternative to fiat money to make payments.

The fact that XRP provides an excellent method of making transactions that differs from traditional fiat money has long been known. So, for example, recently Australian financial exchanges spoke about the overwhelming proportion of their customers who make transactions abroad using Ripple. The undeniable advantages of XRP were named as such reasons. Transfers are made within minutes or even faster, and the fees charged for transfers are very low.

Lawyer John Deaton also cited another provision of the law as an example, refuting the hypothesis of the US Securities and Exchange Commission regarding the belonging of digital assets to the concept of “securities”. As an argument, he used another law, which speaks of the lack of satisfaction with the Howey criterion, which states the use of an asset as an alternative to fiat funds.

In other words, the Howey criterion says that if an asset can be used as payment between people, then securities cannot be called securities, and XRP is just the same used by many crypto enthusiasts as a method of payment and transfer of funds. This contradicts the words of the SEC that cryptocurrencies, and in particular XRP, are full-fledged securities that should be subject to the same regulation as traditional similar assets.