Regulatory Discrepancy! Grayscale Investments clears XRP, not considered a security in the UK and Japan

Grayscale Investments announced today that it has dissolved the Grayscale XRP Trust and will be returning funds to investors. Currently, Grayscale Investments no longer holds any XRP-related investment products. Source

Main Reason is Securities Regulation Concerns

Grayscale Investments' XRP-based investment products are facing an unregistered securities lawsuit, prompting the removal of XRP from its Digital Large Cap Fund DLC on the 5th. On the 14th, Grayscale also delisted Grayscale XRP Trust, which is based on XRP, for the same reason, while liquidating all XRP positions.

The company stated: In response to the enforcement actions by the U.S. Securities and Exchange Commission (SEC), major players have announced measures to delist XRP. This may have a negative impact on investors in trust products, so the fund sponsor decided to sell XRP back to USD to maintain overall operations. Grayscale will return cash to investors after deducting relevant fees.

Goodbye, XRP Trust

Let's revisit Grayscale Investments' product summary on January 12th when Grayscale XRP Trust had assets under management of $26.5 million.

By January 13th, it had already been removed from the product list:

You can read "Farewell to XRP Trust: Grayscale's Fund Removes XRP, Lead Investor in Series C Lawsuit Against Ripple, Major Whales Reducing Holdings" to find out which platforms have decided to stop XRP trading as of 2020.

Japan and UK Do Not Consider XRP a Security

The SBI Group in Japan has been a major supporter of Ripple, and its president Yoshitaka Kitao cited comments from Nomura Research Institute that in Japan, XRP is regulated as a "cryptocurrency" under the Fund Settlement Act, not as a "security" under the Financial Instruments and Exchange Act. Therefore, there is no need to apply to the Japanese Financial Services Agency when fundraising or selling. Thus, despite the SEC's lawsuit against Ripple, it does not affect the compliance of XRP in Japan.

Furthermore, in a report published by the UK Treasury in 2021, XRP is classified as an "exchange token" in the category of "unregulated tokens." The description states: "Tokens primarily used for trading, including well-known tokens such as Bitcoin, Ether, and XRP."

Regulatory Uncertainty Across Jurisdictions

In fact, exchanges operating outside the U.S. are hardly affected, as non-U.S. major spot exchanges like Binance, Huobi, OKEx, FTX, etc., have not suspended XRP trading due to securities lawsuits.

U.S. laws provide regulatory agencies with ample interpretative space, and enforcement actions by both the SEC and CFTC are based on case handling. While XRP has not had such troubles in the past, when the SEC collects evidence and files charges based on facts, the case will still stand. We believe that there may be more similar enforcement cases in the future.

Different definitions and regulations for cryptocurrencies in other jurisdictions may lead to different outcomes from the U.S. Unless U.S. precedents become an international enforcement consensus, XRP can still be traded safely in other relatively legal countries without being affected by unregistered securities. However, for XRP, which boasts cross-border payment use cases, it will undoubtedly suffer a major blow.