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XRP cryptocurrency jumps as investors hope Ripple will win legal battle with the SEC
The XRP cryptocurrency soared on Wednesday as investors grew hopeful that Ripple, a company closely associated with the token, would win its prolonged legal battle with the U.S. Securities and Exchange Commission.
The token was worth around 45 cents at about 8 a.m. ET, according to data from CoinGecko, up over 11% in the last 24 hours. It was earlier trading up as much as 20%.
Traders pointed to a supplemental notice submitted by Ripple on Monday which pointed to a ruling in a separate case concerning Binance.US' rescue plan for collapsed crypto lender Voyager Digital. Under the plan, Binance's U.S. unit was to buy all of Voyager's assets, including its native VGX token, in a $1.3 billion deal.
The SEC rejected the plan, arguing VGX was akin to a security and calling Binance an unregistered securities exchange, according to the notice from Ripple.
However, the judge rejected the SEC's objections and approved the bankruptcy plan citing what he called the "vagueness" of the regulator's arguments and stating the SEC had not "offered any guidance at all as to just what it was that the Debtors allegedly were supposed to prove" to demonstrate VGX was not a security, according to the Ripple letter.
The SEC wasn't immediately available for comment when contacted by CNBC.
The SEC accuses Ripple, CEO Brad Garlinghouse and co-founder Chris Larsen of breaching U.S. securities laws by selling XRP without first registering it with the regulator. Ripple contests the SEC's allegations, maintaining the view that XRP should be considered a digital currency rather than a security.
Monica Long, president of Ripple, told CNBC Wednesday morning that she was "very hopeful" about achieving a positive resolution to the SEC battle, adding she thinks it will reach a conclusion sometime this year.
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Long said she thinks it's "very unlikely" the judge will rule in favor of the SEC "considering by our view both the facts and the law are on our side."
If XRP were to be deemed a security, it could have huge ramifications for the digital currency industry.
Floods of tokens may end up falling into the same category, making them regulated financial instruments that would need SEC supervision and frequent transparency disclosures.
Market sentiment improving
It is not clear when she will make her decision. However, some crypto investors believe an outcome will arrive in the coming days.
XRP "is being bolstered by a potential positive outcome in the SEC case," Vijay Ayyar, vice president of international at crpyto exchange Luno, told CNBC via email Wednesday.
The token, which is the sixth-largest globally by market value, is also being boosted by the broader crypto market sentiment, Ayyar said.
Bitcoin is up 70% since the start of the year and is currently trading above $28,000 for the first time in nine months. Ether, the second-biggest token, has risen 50% year-to-date.
"Overall, crypto markets have rallied in the past week or so, given the anticipation of a pause or slow down in interest rates and the slowdown in inflation," according to Ayyar.
Regulation by enforcement?
In recent weeks, the regulator has taken aim at numerous crypto firms alleging they are engaged in illegal securities offerings.
Stablecoin issuer Paxos said the SEC served it with a notice threatening legal action over claims that BUSD, the native stablecoin of crypto exchange Binance, was a security that should have been registered with the regulator.
The regulator also hit crypto lender Genesis and exchange Gemini with charges alleging a high-yield investment product offered by the two companies should have been treated as a security.
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