Ripple News: European Corporate Governance Institute Recognizes XRP’s Non-Security Status

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XRP is tumbling with every news in the market, and with BTC rolling down, it will be hard to imagine the future scope. Adding to the XRP woes, the European Corporate Governance Institute (ECGI) recently released a research paper affirming that XRP is not classified as a security, aligning with a U.S. federal court ruling from the previous year. 

Understanding the XRP Status 

Titled “Corporate Governance Meets Data and Technology,” the paper, authored by scholars Wei Jiang and Tao Li from Emory University and the University of Florida, respectively, delves into the regulatory landscape surrounding token offerings, with a particular focus on securities regulations and token classification.

Regulatory Scrutiny and Token Offerings

The research paper sheds light on the evolving fundraising methods in blockchain-based startups, such as initial coin offerings (ICOs), initial exchange offerings (IEOs), and security token offerings (STOs). It underscores the regulatory scrutiny these methods face, especially regarding how issued tokens are classified.

Notably, the paper references Ripple and its native token, XRP, as a case study within the broader discussion of regulatory concerns. It highlights the SEC’s lawsuit against Ripple Labs, which alleged that XRP sales violated U.S. securities laws.

Court’s Ruling and XRP Classification

However, the scholars pointed out that on July 13, 2023, a U.S. federal court ruled that XRP was not classified as a security when sold to the public on exchanges. The study clarified that XRP could be considered a security when sold directly to institutional investors.

This acknowledgment by the ECGI holds prominence to XRP at this stage, which is huddling the worse SEC regulatory scrutiny. It provides an example of how such tokens are approached and classified within regulatory frameworks.

Legal Expert Insights

Responding to the research, legal expert Bill Morgan said that while XRP is not deemed a security, it may still be involved in transactions or schemes that fall under securities regulations. This distinction clarifies the role of XRP within the regulatory landscape.

Morgan notes that while XRP may not be classified as a security, it can still be involved in transactions or schemes subject to securities regulations. For example, if XRP is used in an offering that meets the criteria of an investment contract under the Howey Test – a legal framework used by U.S. courts to determine whether certain transactions qualify as investment contracts and, therefore, securities – then it would be subject to securities laws.