- Ripple CTO David Schwartz explained the company’s XRP sales strategy as a necessary method to obtain liquidity while emphasizing transparency and countering price manipulation accusations.
- Amidst ongoing legal disputes with the SEC, Ripple continues to see strong market performance and network growth, with XRP trading positively despite regulatory challenges.
In a recent development that has stirred the cryptocurrency community, Ripple’s Chief Technology Officer, David Schwartz, provided an in-depth explanation of the company’s strategy to liquidate its XRP holdings. This comes amid ongoing legal disputes with the U.S. Securities and Exchange Commission (SEC) and notable market gains for XRP.
They can't just pay the earned income and long-term gains taxes. What do they do with the position that lost money? This strategy can only be used to get ordinary income taxed at LTCG rates.
— David "JoelKatz" Schwartz (@JoelKatz) May 19, 2024
Escrow Release Methodology and XRP Holdings of Ripple
The growing sales of XRP by Ripple have frequently drawn criticism, leading to Schwartz addressing these concerns. According to Ripple’s Q1 2024 report, the company manages its XRP through two primary methods: direct liquid holdings and escrow accounts. As of March 31, 2024, Ripple held 4.8 billion XRP coins directly, while 40.1 billion XRP were locked in escrow, released on a regulated schedule over 42 months. Each month, a portion of the escrowed XRP is released, with most being returned to escrow to restart the cycle.
Schwartz emphasized that the sales are Ripple’s practical approach to obtain liquidity from its XRP holdings, and assured that there are no plans to significantly alter the volume of sales. He also highlighted that the sales are conducted transparently, countering accusations of potential price manipulation.
We were originally hoping to get our holdings way down in just a few years mostly using giveaways. That strategy just didn't work. We don't want to be holding lots of XRP for decades, but it's not clear what other options we have.
— David "JoelKatz" Schwartz (@JoelKatz) February 19, 2024
FWIW, I believe the primary drivers of XRP's…
Growth of the Network and Developer Concerns
Some within the community, like the anonymous researcher Darkhorse, have called on Ripple to reconsider its sales strategy, suggesting a temporary halt to assess the impact on XRP prices. However, Schwartz maintained that manipulating prices deliberately would be unethical.
Concerns were also raised about Ripple’s large XRP holdings potentially deterring developers from engaging with the network. Contrary to these concerns, the XRP Ledger has shown significant growth. Transactions on the XRP Ledger doubled in the first quarter of 2024, indicating robust network activity and developer interest.
Meanwhile, the legal tussle with the SEC continues, with no resolution in sight. Ripple recently countered the SEC’s demand for a $2 billion penalty, which the company deems excessively harsh given the lack of allegations or findings of recklessness or fraud. Stuart Alderoty, Ripple’s Chief Legal Officer, criticized the SEC’s approach as an attempt to intimidate the entire cryptocurrency sector in the U.S.
“In a case that had no allegations (or findings) of recklessness or fraud, and in which Ripple won on significant issues, the SEC’s task is just more evidence of its ongoing intimidation against all of crypto in the U.S.,” Alderoty stated.
Despite these challenges, XRP has demonstrated resilience in the market. According to CoinMarketCap, XRP is trading at $0.5356, marking a 4.42% increase in the last 24 hours and a 6.01% gain over the past week.
The SEC’s aggressive stance has faced criticism from various quarters, including Paul Grewal, Coinbase’s chief legal officer, who urged other cryptocurrency firms to scrutinize the regulator’s past actions. Grewal argues that the SEC’s departure from traditional practices raises questions about the legitimacy of its claims.
Ripple’s battle with the SEC, alongside its strategic sales of XRP, continues to be a focal point in the evolving landscape of cryptocurrency regulation and market dynamics. As the legal and market conditions unfold, Ripple’s transparent approach and network growth are key factors to watch.