With XRP vs SEC ruling nearing an end, I wanted to share my thoughts on this issue.
First of all, I agree with Chairman Gary Gensler’s claim that a lot of the cryptos are securities. Most if not all of the tokens issues by central exchanges should be considered as securities, unless any of those exchanges could provide a financial report that prove that none of the money raised for their token was used for the development of their centralized exchange and all the money went into the development of their own blockchain. It is quite easy to guess that money raised during their icos were definitely used to fund the development of their exchanges.
Also, these coins’ values are backed by exchanges, where all of them are basically for profit organizations, which makes crypto tokens to be classified as securities.
For example, while Binance CEO argues that BNB is not a security, I do not think that is the case. BNB is basically a fork of ETH and there isn’t much of technical deviation from the original ETH code repo.
GitHub - bnb-chain/bsc: A BNB Smart Chain client based on the go-ethereum fork
The goal of BNB Smart Chain is to bring programmability and interoperability to Binance Chain. In order to embrace the…
GitHub - ethereum/go-ethereum: Official Go implementation of the Ethereum protocol
Official Golang execution layer implementation of the Ethereum protocol. Automated builds are available for stable…
The only reason why BNB has current market cap is because Binance is backing it and owning BNB helps lower trade fees while using Binance platforms. Some might argue that BNB has value, because BNB provides cheaper transaction fees, but that argument does not make sense. If I fork ETH repo and create a coin called ABC with lower transaction fees, by allowing fewer validators and expanding the block size, etc, would it have any material value? No.
Thus, I think a lot of those exchanges will get in trouble within a couple of years. Thus, though not a financial advice, I do not advise holding exchange coins. Remember, initially, Netscape and Yahoo looked invincible. However, they are gone.
Now regarding cases for like XRP and other alternative blockchains, I think the cases are slightly more complicated. I think for these cases, decentralization and how the money raised were used will play key roles for the argument.
The Ethereum Foundation is a non profit organization, and many would agree that ETH is fairly decentralized. None of the money raised during the ico went to fund for profit projects, e.g centralized exchanges. So I do not see ETH getting classfied as a security. Ripple Labs on the other hand, is a for profit organization. However, that labeling whether an organization is non profit or profit doesn’t really matter for XRP’s case. What I think matters is how the money raised during the ico was used and if the money were actually used as advertised.