Ripple Labs Is an Intriguing Company, but Stay Well Clear of XRP Crypto

While Bitcoin (BTC) is once again capturing headlines and along with it the fancy of the investment community, the opposite is true for Ripple (CCC:XRP).

Coin cryptocurrency ripple on the background of a stack of coins

Source: Shutterstock

The cryptocurrency is in the news for the wrong reasons. In this case, Ripple Labs is being sued by the Securities & Exchange Commission (SEC) for allegedly selling over $1 billion of registered tokens.

The issue is whether XRP is a currency or a security, and the more I read on the subject, the less clarity I get. Proponents on both sides hold firmly entrenched views.

What I’m curious about is what exactly investors are trying to invest in? As a cryptocurrency, XRP has been, by design, a steady investment. That’s diametrically opposite of Bitcoin which remains volatile. But as a payment provider, Ripple, and by extension XRP, has a more compelling story.

What’s In a Name?

Before I go any further, it’s important to understand the distinction between Ripple Labs and XRP. Ripple Labs is a cryptocurrency platform, not a currency. XRP is a coin used by the Ripple platform. Colloquially, Ripple and XRP are used synonymously.

However, Ripple goes to great lengths to refer to XRP as an “independent digital asset.” Although the company uses the digital coin on its platform, Ripple insists it does not have control over the technology.

And yes, in this case semantics matter. In fact, they may decide the lawsuit.

Ripple Is a Solution to a Common Problem

Peer-to-peer money transfer has revolutionized the banking system. But it can still be expensive, and inefficient, to send money around the world.

In addition to fees being charged for currency conversion, it can sometimes take several business days for funds to reach the destination account.

Ripple is providing a solution to this problem through its platform. Customers can use Ripple to send large sums of money quickly and securely at little cost. And Ripple counts numerous banks and payment providers as customers.

This is where the story gets a little more complicated. Ripple uses XRP to facilitate these transactions. describes XRP as follows, “As a coin, XRP serves as a neutral asset that can represent anything.”

A Case of Mistaken Identity?

My initial takeaway from the ongoing lawsuit is that Ripple has seemed to play a little fast and loose with its relationship to XRP. The heart of the SEC’s argument is that XRP is an equity, not a cryptocurrency. As such, it can be regulated.

This is where things get muddy, at least for me. XRP is a cryptocurrency, but one that is not necessarily recognized as such by the broader crypto community. It lacks some of the important features of bitcoin and ethereum, such as a mining operation.

Nevertheless, having the crypto purists debate whether something is a currency is like debating whether “Die Hard” is a Christmas movie (it’s not by the way). It makes for a fun albeit meaningless debate. Arguing about what it “really” is doesn’t change the fact that XRP has been largely recognized as a currency.

And that’s not really the issue, it’s whether or not the company created XRP. To help you answer that question, I’ll encourage you to read Josh Enomoto’s perspective on the lawsuit.

In that article, Enomoto writes, “the point the regulatory agency is making isn’t about what a security is called. Again, if it meets the criteria of a security, then it’s a security and falls under the SEC’s jurisdiction.”

Should You Invest in Ripple?

As a cryptocurrency play, XRP doesn’t do much to excite me. After all, the fundamental premise behind cryptocurrency is to create a store of value that is independent from gold. XRP is not set up to deliver that kind of growth.

Ripple Labs is not a public company. If it were, I’d find it to be a very intriguing investment. As it stands now, investors seem be buying the coin because of the platform it facilitates. But with the coin serving as a neutral asset, that’s not a compelling investment for me.

On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.

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