As Ripple Labs remains in a legal battle with the SEC over whether XRP is a security, the crypto asset is not yet part of its newly launched liquidity hub.
While some have questioned whether the decision is a signal the company is being pessimistic about its asset amid a legal battle with the SEC, executives at the crypto company on Monday detailed the reasons for the asset’s exclusion, adding that the omission could be of a temporary nature.
Ripple announced in November 2021 its intention to launch Liquidity Hub – a product that uses intelligent order routing to source digital assets at specified prices from market makers, exchanges and OTC desks. The hub would provide access to XRP, Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Ethereum Classic (ETC), and Bitcoin Cash (BCH).
Ripple said in a blog post last week that its liquidity pools would cover BTC, ETH, LTC, ETC, BCH, as well as US dollars (USD) and stablecoins USD Coin (USDC) and Tether (USDT).
“XRP is being reviewed alongside other tokens for support within the product,” the blog reads. “We look forward to supporting XRP as it receives regulatory clarity in the US.”
The SEC claimed in 2020 that Ripple Labs and two of its executives raised more than $1.3 billion in what they believed to be an unregistered securities offering of XRP in 2013. The case is not yet closed.
In an SEC complaint against Bittrex filed Monday, six tokens listed on its platform — DASH, ALGO, OMG, TKN, NGC, and IHT — were named as securities.
Regulatory clarity is important for the enterprise customers for whom the hub is designed, Stuart Alderoty, Ripple’s chief legal officer, tweeted Monday. He added that the asset’s low liquidity in the US is another reason XRP was not considered.
“Our product team has made it very clear – [Liquidity Hub] is designed to access all types of crypto liquidity, not just XRP,” Alderoty tweeted. “Our goal [Liquidity Hub] Customers – now mostly institutions in the US – want access to a variety of tokens such as BTC, ETH and stablecoins.”
The Chief Legal Officer added that Ripple’s on-demand liquidity (ODL) product has been using XRP for years and will continue to do so.
Brad Chase, Ripple’s head of liquidity products, told Blockworks in an email that Ripple “is committed to supporting XRP” for Liquidity Hub “if we can provide a good customer experience and based on customer demand.”
Are you treading carefully?
Attorney John Deaton, a partner at the Deaton law firm who is leading a class action lawsuit against the SEC alleging that its enforcement action against Ripple harmed XRP investors, said in a Twitter space Monday that he doesn’t blame people that they viewed Ripple’s decision as “a slap in the face.”
Still, Ripple’s decision to exclude XRP from the Liquidity Hub is not surprising and likely makes legal sense, he added.
“They provide liquidity for companies,” Deaton said. “So it’s not that Ripple doesn’t still believe that XRP is not a security. [It’s about] When there is that one token that is hotly debated and controversial as a security, what is the risk appetite of these companies and will they incorporate or engage?”
Deaton added that adding XRP to the Liquidity Hub could have prompted the SEC to attempt to halt the offering.
“It just eliminates any unnecessary risk when you launch a new product line,” he said. “For me, it’s one of those things where the conservative approach is going to win out.”
The ongoing legal battle with the SEC hasn’t stopped Ripple Labs from pouring billions of dollars into buying back the XRP token on secondary markets, a Blockworks analysis of the company’s quarterly reports revealed.
According to the disclosures, Ripple has spent almost $8.4 billion buying XRP since the beginning of 2021 to protect the token’s markets and its customers.
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