In only a few days, the crypto-craze has reached way beyond anyone's imagination. The U.S. Securities and Exchange Commission filed charges against Ripple Labs, and its CEO, Jed McCaleb, and other executives for failing to report its sales of XRP as securities.
On Wednesday the SEC made a statement about controlling digital asset securities held in the custody of broker-dealers. There are both significant and complementary elements of government policy. The SEC may wish to issue its own rules governing cryptocurrencies.
Ripple is one of the newest currencies in the cryptocurrency environment. Its price has recently skyrocketed in recent months owing to the success of the second-largest cryptocurrency in the industry which is currently ranking #3 in overall market capitalization. Most notably, the technology that Ripple provides is much more robust and dependable.
Ripple is finding acceptance by more than 60 of the leading financial institutions around the world. Ripple has breached a hurdle when it comes to cryptocurrency: surpassing the desire to improve its own technology. This suggests a growing alternative for the growth of the digital currency field. Others regard Ripple as dangerous because of its tech loopholes.
What might cause this rising star to fall down?
Two main things gave Ripple away.
1. Ripple Investments buys into the "Small World" philosophy
According to recent study by Technology Review, Ripple uses small world methodologies. It is this way of thinking that almost everyone can be linked to someone else through six measures. "Strangers" can be familiarized with each other by a few intermediary people who know each other. For Ripple, this is a really important term.
Ripple operates within a principle of immutability. It enables the valuation of trust to remain constant during a transaction. There is an opportunity for each consumer to serve as an intermediary as he or she receives a small payment. With Ripple, people move funds in a quicker and less costly way than other ways. This has massively capitalized the FinTech system with large corporations that wouldn't otherwise have been involved in bitcoin.
2. Openness can cause vulnerability
The transparent manner in which the Ripple network works has, on the other hand, attracted vulnerabilities. While the heart of the Internet has remained very liquid, network attacks can still cripple some users. There are around 50,000 wallets that could be decimated if such a hackers attack were to occur.
Where are we?
Many exchanges would be forced to delist Ripple, so liquidity will dry up. If the price of XRP crashes in this case, he says that it will crash hard. The exchange that trades in XRP will have to register as a securities exchange if the SEC wins its case. There will be no legal avenue for these peer-to-peer transactions.
