Digital Assets: Grayscale To Liquidate XRP Trust

January 14, 2021 | Digital Assets, News

The asset manager cites difficulties in converting XRP to U.S. dollars.

Grayscale Investments announced Wednesday its decision to liquidate its Grayscale XRP Trust. The asset manager said it was now proceeding to take steps to dissolve the Trust. On December 22, 2020, the SEC decided to file a federal court action against certain third parties asserting that XRP is a “security” under federal securities law. (THE BLOCK)

Illiquidity of XRP forces Grayscale to shutter the XRP Trust

Grayscale said in a statement: “In response to the SEC’s action, certain significant market participants have announced measures, including the delisting of XRP from major digital asset trading platforms, resulting in the Sponsor’s conclusion that it is likely to be increasingly difficult for U.S. investors, including the Trust, to convert XRP into U.S. dollars, and therefore continue the Trust’s operations.”

After the SEC’s action, there has been a spate of suspensions of XRP trading by various exchanges. The latest is the Lithuanian cryptocurrency exchange, CoinGate, which will suspend trading in XRP on January 15.

Earlier, Grayscale itself had jettisoned all the XRP holdings from its Digital Large Cap Fund. It has now liquidated the Grayscale XRP Trust’s XRP and intends to distribute the net cash proceeds to Trust shareholders. Post distribution, the Trust will terminate.

Despite Grayscale, GateHub and Japan stand by XRP

However, XRP has a supporter in cryptocurrency payment solutions provider, Gatehub, whose technology uses the XRP Ledger. It confirmed it would continue to list XRP “until the SEC’s complaint against Ripple is adjudicated and a final decision entered that XRP is properly classified as a “security,” or until we receive a cease-and-desist notice from the SEC.”

Further, on Wednesday, Japan’s Financial Services Agency told The Block that it sees XRP as a cryptocurrency, not a security, as deemed by the SEC.

The SEC suit is against Ripple, not XRP

According to Michael Arrington, partner at Arrington XRP Capital and founder of TechCrunch, (as quoted by San Francisco News), XRP will continue to function as a token because Ripple, the company, does not own all of XRP. Besides, the SEC’s lawsuit is against Ripple, not XRP.

“Whatever happens to Ripple, XRP will continue to exist. It exists independent of the company. It exists on a distributed ledger,” Arrington says.

Related Story:  SEC Has Ripple In The Dock; Garlinghouse Fires Back

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