Home Technology Here’s Some Cryptocurrency. Now Please Use It.

Here’s Some Cryptocurrency. Now Please Use It.


SAN FRANCISCO — You may have seen the actor and part-time tech investor Ashton Kutcher present $4 million worth of digital coins called XRP to Ellen DeGeneres’s favorite charity on her talk show. Or maybe you saw Stephen Colbert announce a $29 million donation of XRP to schoolteachers on his late-night show.

Ripple, a San Francisco company that is rolling in money thanks to last year’s run-up in the value of cryptocurrencies, was behind the giveaways. And it has quietly become one of the most valuable start-ups of the last decade thanks to the value of XRP, the digital token its founders created six years ago.

Now comes the hard part: persuading people to use XRP for something other than speculative trading. It is an issue facing most of the still-young cryptocurrency industry. Digital tokens like Bitcoin and its many imitators (like XRP) were designed to make electronic transactions of all sorts easier. But today almost no transactions are happening, other than on virtual currency exchanges where people bet on their price.

Despite a dramatic drop in the value of cryptocurrencies this year, Ripple still owns $30 billion worth of XRP, and the company wants to get some of those digital tokens into the hands of potential users.

But Ripple’s enormous holdings come with significant risks. The biggest legal concern facing many cryptocurrency projects is regulators in the United States categorizing their tokens as investment contracts, or securities.

If projects like XRP and EOS get the security label, they will be subject to restrictions on trading and movement, making it even less likely that people will use the tokens for their intended purposes.

A top official with the Securities and Exchange Commission said in a speech this month that one of the biggest factors in determining whether a token is a security is the role a central organizer plays in promoting the coin and increasing its value, especially if the central organizer holds a significant amount of the tokens.

Ripple’s executives have said they are confident XRP is not a security because XRP could still be used even if the company disappeared. The company hired Mary Jo White, who was chairwoman of the S.E.C. from 2013 to 2017, to defend it against lawsuits from disgruntled XRP investors who claim the company misled them.

But the situation is something of a Catch-22 for Ripple: Its efforts to promote XRP could demonstrate how reliant XRP is on Ripple.

“Centralized control of a cryptocurrency is the central element to the S.E.C.’s test of whether these tokens are securities,” said Lawson Baker, a lawyer and venture capitalist in the cryptocurrency industry. “Any time you are putting XRP to work to defend it or buy good will, you are going to hurt your case that you aren’t a security.”


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