Grayscale Investments has announced that it has started to dissolve the Grayscale XRP Trust. The news follows the filing of a lawsuit by the Securities and Exchange Commission (SEC) in December.
The SEC alleges that XRP is a security based on Ripple’s involvement with the digital currency. This has caused several cryptocurrency companies to distance themselves from XRP in recent weeks.
Grayscale Dissolves XRP Trust and Distributes Proceeds to Shareholders
Earlier this month, News reported that Grayscale Investments removed XRP from its Digital Large Cap fund. The move followed the SEC’s decision to press charges against Ripple Labs for the sale of unregistered securities.
Less than two weeks later, Grayscale has begun to offload its XRP holdings. In a press release, the company stated that the SEC’s lawsuit prompted the decision.
The US securities regulator announced legal action against Ripple Labs and executives on Dec. 22, 2020. In the weeks following, several exchange platforms either suspended XRP trading or abandoned it completely.
Thursday’s press release explained that ‘significant market participants’ could no longer support the price make it ‘increasingly difficult’ for US holders (Grayscale included) to exchange for US dollars. This will reportedly hinder the Trust’s operations.
Grayscale stated that the net proceeds from the XRP Trust’s liquidation would be distributed among shareholders. Following distribution, the Trust will terminate.
End of the Line for XRP?
Grayscale Investments is one of the largest buyers of cryptocurrencies on the planet. The dissolution of its XRP Trust is likely a big blow to those hoping for a rebound in prices.
However, the outcome of the SEC’s lawsuit doesn’t necessarily mean the end for XRP. As Ripple Labs explained in its own late December press release, most XRP trading volume comes from outside of the United States.
The firm’s statement explains the regulatory clarity in the UK, Japan, Switzerland, and Singapore. In fact, last month, the Japanese think-tank Nomura Research Institute revealed that under local law, XRP is a ‘cryptographic asset‘ and not a security.
A change in SEC staffing may still provide a glimmer of hope for XRP’s US operations too. Reports suggest that President-elect Joe Biden will appoint crypto-friendly Gary Gensler to the role of SEC Chair.
As cryptocurrency legal specialist Jake Chervinsky pointed out, Gensler understands the digital asset industry. His appointment, therefore, may increase the chances of a Bitcoin ETF finally launching.
However, Chervinsky is less optimistic about XRP’s fate, even under Gensler. He draws attention to Gensler’s 2018 comments in which he claimed a ‘strong case’ that XRP is a security. He added that an incoming SEC Chair reversing prior SEC decisions is ‘difficult to imagine’ too.