Ripple, the blockchain-based digital payment network, has unveiled significant changes to its XRP sales strategy in its latest quarterly market report for Q4 2023, released on February 7. The report highlights key developments in the XRP market, including a notable shift in how Ripple conducts sales to institutional buyers, a move initiated before a crucial legal ruling on July 13, 2023.
Ripple’s strategic shift in XRP sales
The Q4 market report from Ripple reveals a revival in XRP’s spot trading volume, with an average daily trading volume of $600 million. Despite this resurgence, XRP’s performance lagged behind other major cryptocurrencies, with a 19.5% gain in Q4 2023, compared to Bitcoin’s 56.8% and Ethereum‘s 36.5% increases. Amidst these market dynamics, Ripple drew attention to its ongoing legal battle with the SEC, particularly highlighting the implications of Judge Analisa Torres’ ruling that deemed XRP not a security by nature. However, the judge also found that Ripple’s past institutional sales violated securities laws.
In response to these legal challenges, Ripple disclosed a preemptive adjustment to its sales approach to institutions. Previously, Ripple sold XRP directly to institutional buyers under specific contracts, a practice that Judge Torres ruled as constituting investment contracts. These sales, totaling $729 million worth of XRP, were deemed unlawful as they were considered to offer an expectation of profit from Ripple’s efforts to enhance XRP’s value.
New sales model and legal implications
Ripple’s adaptation involves a shift to a model where XRP purchases by institutions are intended for immediate use in facilitating On-Demand Liquidity (ODL) transactions rather than as long-term investments. This change aims to sidestep the securities classification by eliminating the expectation of profit from holding XRP, as these transactions typically last only a few seconds. This strategic pivot, implemented before Judge Torres’ July ruling, signifies Ripple’s effort to comply with securities regulations and mitigate legal risks.
The significance of this shift extends beyond regulatory compliance. With the SEC’s ongoing scrutiny and the court’s move to the remedies phase of the litigation, Ripple’s proactive change in its sales model could influence the court’s decision on penalties for past sales. Moreover, the recent court order granting the SEC’s request for documents related to Ripple’s institutional sales highlights the importance of this strategic shift. If Ripple’s new sales model is deemed compliant, it could safeguard the company’s ability to continue its XRP sales without facing a ban or severe penalties.
Ripple’s latest quarterly report sheds light on the company’s strategic adjustments and underscores the broader implications for the XRP market and Ripple’s legal standing. As the case progresses to the remedies phase, the outcome will likely significantly impact Ripple’s operations and the regulatory landscape for cryptocurrencies in the United States.
