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SEC Sues Ripple, Highlighting Regulatory Risk

Ripple was sued by the SEC over its issuance of the XRP asset. While Ripple announces that they will fight this in the courts, it nonetheless highlights the regulatory risk involved in cryptocurrencies. Govt agencies have the ability to bring lawsuits, and enact new rules around crypto at any time. For the last several years, cryptocurrency has mostly operated in a grey area in terms of legality. In regards to Bitcoin, there is not a central "company" for which the govt to direct any punitive efforts. However, we would argue that this regulatory action, along with the recently rumored FinCEN rules around disclosure, indicates that risk in this space is growing; not decreasing.

We have also seen Corporations move to add Bitcoin to their company's treasury holdings (Microstrategy - MSTR ticker) - Our opinion is that this also involves a great deal of regulatory risk. And as MSTR's CEO Michael Saylor encourages other corporations to join him in purchasing Bitcoin, perhaps he believes there is strength in numbers that would reduce this risk.

Reactions across the internet concerning the XRP announcement have varied. Bitcoin maximalists mostly cheered the decision. Hedge Fund manager and early XRP adopter, Michael Arrington, has publicly stated that this is an attack on all of crypto. Clearly, anyone who owns XRP will be upset with this announcement. The silver lining may be that the SEC's lawsuit will finally bring some of cryptocurrency out of the grey area that it has been operating.

Ripple sued by SEC highlights cryptocurrency regulatory risk

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