The U.S. Securities and Exchange Commission (SEC) initiated a lawsuit against Ripple in 2020, claiming that the company violated securities laws through its issuance of the XRP cryptocurrency. After years of intense litigation, a partial resolution emerged in 2024, though the legal proceedings have not yet concluded entirely.
With a current market capitalization exceeding $150 billion, XRP ranks among the top digital assets globally. Its value surged by over 400% following the U.S. presidential election on November 5, reflecting heightened investor optimism. Many anticipate that the new administration could adopt policies favorable to the cryptocurrency sector, prompting the question: is now the right time to invest in XRP?
Understanding XRP’s Role in the Ripple Payments Network
Global banking systems often rely on divergent infrastructures, leading to inefficiencies in cross-border transactions. While many institutions use the SWIFT network for international fund transfers, others operate on different systems, resulting in delays and higher costs.
Ripple developed the Ripple Payments network to address these challenges. It establishes standardized payment protocols that enable interoperability between financial institutions, regardless of their backend systems. This allows banks to settle transactions directly and instantly, reducing reliance on intermediaries.
The XRP token was created to facilitate transactions on this network. For instance, a U.S. bank can send XRP to a bank in South Korea instead of converting U.S. dollars, avoiding foreign exchange fees and streamlining the process. Recipients can then convert XRP into their local fiat currency. This functional utility distinguishes XRP from many purely speculative cryptocurrencies and supports its long-term value proposition.
The SEC’s Legal Scrutiny of Ripple
XRP has a fixed total supply of 100 billion tokens. Approximately 57 billion are currently in circulation and traded on various exchanges. The remaining tokens are held by Ripple, which periodically releases portions to meet institutional demand.
This centralized token distribution differs significantly from decentralized cryptocurrencies like Bitcoin, which have predetermined emission schedules and no central controlling entity. It also formed the basis of the SEC’s lawsuit against Ripple, which argued that XRP should be classified as a security—subject to the same regulatory requirements as stocks or bonds.
In August 2024, a federal judge issued a mixed ruling: XRP could be considered a security when sold directly to institutional buyers, but not when traded on secondary markets or used for transactional purposes. Ripple was fined $125 million, a outcome largely perceived as favorable. However, the SEC has appealed the decision, prolonging legal uncertainty.
The recent election outcome has fueled optimism among XRP investors. The incoming administration has nominated a known digital asset advocate to lead the SEC, raising expectations that the agency may adopt a more supportive stance toward Ripple and the broader crypto market.
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Should You Invest in XRP Before January 20?
It’s important to note that financial institutions using the Ripple Payments network are not required to use XRP. They can also transact using fiat currencies while still benefiting from faster settlement times. This means that widespread adoption of Ripple’s technology does not automatically translate into increased demand for the XRP token.
While a more favorable regulatory environment would undoubtedly benefit Ripple as a company, its impact on the token’s price may be less dramatic than some anticipate. Despite its recent rally, XRP remains below its all-time high of $3.40, set in 2018.
Positive market sentiment could drive further short-term gains in 2025, especially if the new administration introduces industry-friendly policies. However, without a fundamental increase in utility-driven demand, price appreciation may rely heavily on speculation—a weak foundation for sustainable long-term growth.
Historical precedent also warrants caution. After reaching its peak in 2018, XRP’s value declined by over 90%. Similar volatility remains a possibility. Therefore, while upward movement is plausible, XRP may not qualify as a safe investment, either before or after January 20.
Frequently Asked Questions
What is the main use case of XRP?
XRP is primarily used within the Ripple Payments network to facilitate fast, low-cost international transactions between financial institutions. It serves as a bridge currency to avoid traditional foreign exchange fees and delays.
Why did the SEC sue Ripple?
The SEC alleged that XRP was an unregistered security and that Ripple’s token sales violated federal securities laws. The case focused on whether XRP should be regulated similarly to stocks or bonds.
How did the court rule in the Ripple-SEC case?
A federal judge ruled that XRP is not a security when traded on public exchanges or used in transactions, but may be considered a security when sold directly to institutional investors. The SEC has appealed this decision.
What impact could the new administration have on XRP?
The incoming leadership may adopt a more supportive regulatory approach toward cryptocurrencies, which could help resolve Ripple’s ongoing legal challenges and improve market sentiment toward XRP.
Is XRP a good long-term investment?
While XRP has functional utility, its value is influenced by both adoption trends and market speculation. Investors should carefully assess both the potential and the risks before making a decision.
Can Ripple succeed even if XRP doesn’t gain value?
Yes, Ripple’s business model does not depend exclusively on the appreciation of XRP. The company earns revenue through its enterprise solutions and licensing agreements, regardless of token performance.