On Monday, Coinbase announced that it would begin listing XRP on Coinbase Pro, the exchange’s offering for “expert” traders. XRP joins other cryptocurrencies on the platform ranging from bitcoin, ether, and Litecoin (which are also listed on Coinbase, for non-expert crypto buyers) to DAI, MANA, LOOM, and other lesser known coins only listed on Coinbase Pro, where users have a better idea of the risks they’re getting into by trading volatile or low-volume cryptocurrencies.
Coinbase is making XRP available on its Pro platform gradually. It started yesterday by letting customers move their XRP into Coinbase Pro. Next, users will be able to post limit orders for XRP, then they’ll be able to get those orders matched, and finally the exchange will offer full trading services for its newest listing.
XRP has always been a controversial cryptocurrency for what some deem its centralized leanings. The majority of XRP is owned by Ripple, about 55 billion. Though the company releases a billion XRP per month to the public, it’s going to take years before Ripple depletes its XRP reserves. This leaves people questioning whether or not XRP should be classified as a security issued by Ripple—and that indicates a potential risk for Coinbase, as it’s listing a cryptocurrency that the SEC could crack down on at any moment.
Indeed, XRP investors have already claimed that the cryptocurrency is a security in a class-action lawsuit filed against Ripple and multiple affiliates. The lawsuit is ongoing, and XRP’s status is still unclear. So what does this mean for Coinbase?
Todd Kornfeld, an attorney at Pepper Hamilton LLP’s New York office who specializes in securities and derivatives law, works with clients who issue tokens and invest in cryptocurrency. He tells us that there’s been plenty of speculation surrounding XRP’s status, a matter about which “the SEC has been cagey, publicly.”
It’s hard to predict much of anything that takes place in the crypto trading space because it’s so new. As Kornfeld points out, “There really isn’t a history of enforcement actions for somebody operating what would essentially be an unlicensed securities exchange with a security that isn’t registered.”
While there are plenty of ways the SEC could penalize the crypto exchange, Coinbase’s confidence in listing XRP, however, is perhaps indicative that the regulatory body won’t crack down.
“We don’t know what regulatory analysis or risk analysis Coinbase did” in regards to its XRP decisions, says Kornfeld. Executives at the company could have spoken to the SEC off the record, or simply done research into a number of regulatory scenarios. “Whatever risk assessment they did,” says Kornfeld, “they concluded that it was okay for them to proceed with this business of creating a platform for trading XRP.”
Meanwhile, XRP’s price jumped immediately following Coinbase’s announcement. It was at about $0.30 prior, and after getting close to $0.34, today it’s hovering at $0.32.