About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

19 Duke L. & Tech. Rev. 1 (2021)

handle is hein.journals/dltr19 and id is 1 raw text is: 





   RIPPLE EFFECTS: HOW IN RE RIPPLE LABS
      INC.   LITIGATION COULD SIGNAL THE
  BEGINNING OF THE END OF THE PAYMENT
                         PLATFORM


                         LINDSAY MARTIN'

                            ABSTRACT

       Ripple Labs provides an international payment network that
    allows financial institutions to transfer money more cheaply and
    quickly than traditional international payments. Ripple's native
    digital currency, XRP, supports global payments by acting as
    intermediate currency between different currencies, eliminating
    correspondent bank's need to hold deposits in foreign currencies.
    In an ongoing class action lawsuit, XRP purchasers claim that the
    digital asset qualifies as a security under federal securities laws
    and that Ripple illegally offered and sold XRP as an unregistered
    security. Given Ripple's rising prominence as a tool for financial
    institutions, this pending case will impact cryptocurrency markets
    and international payments. Because XRP is most likely a security
    subject to regulation by the Securities and Exchange Commission
    (SEC), this matter poses an  existential threat to the Ripple
    network. This note examines the legal issues leading up to the
    Ripple litigation and explains why XRP is most likely a security.
    It concludes by discussing the SEC's likely approach to Ripple's
    unregistered Initial Coin Offering (ICO).

                          INTRODUCTION

       Today,  most global payments rely on outdated technology.' To
transact with entities in foreign countries, financial institutions must be
members    of  the  Society   for  Worldwide   Interbank  Financial
Telecommunications  (SWIFT)  network2  and maintain a correspondent
banking relationship with a bank in that foreign country.3 The process is
slow, expensive, and carries risks that international payments will not
reach their intended destination due to the lack of an international central
settlement institution.4


  Duke University School of Law, J.D. expected May 2021.
1 Our Company, RIPPLE, https://ripple.com/company (last visited Nov. 14, 2019).
2 Shobhit Seth, How the SWIFT System Works, INVESTOPEDIA (Feb 11, 2020),
https://www.investopedia.com/articles/personal-finance/050515/how-swift-
system-works.asp; see infra Part I Section A (explaining SWIFT, a messaging
system used by banks and financial institutions to send and receive money transfer
instructions).
3Chelsea Allison, What is SWIFT?, FIN (Mar. 1, 2019), https://fin.plaid.com/
articles/what-is-swift/.
4 See Marcel T. Rosner & Andrew Kang, Understanding and Regulating Twenty-
First Century Payment Systems: The Ripple Case Study, 114 MICH. L. REV. 649,
656-57 (2016).

What Is HeinOnline?

HeinOnline is a subscription-based resource containing nearly 3,000 academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline with pricing starting as low as $29.95

Contact us for annual subscription options:

Already a HeinOnline Subscriber?

profiles profiles most