Japan’s Leading Financial Regulator Clarifies Stance on XRP

The SEC. is currently suing Ripple Labs in the US for holding an unregistered securities sale. However, Japan’s Financial Services Agency (FAS) does not believe that Ripple XRP is a security. According to the regulator, it still considers XRP a crypto coin and not a security.

Details of the Classification

Japan’s FSA issued a statement where it says that it regards XRP to be a cryptocurrency in line with the Payment Service Act. In its statement, the regulator said that it would refrain from making statements regarding the responses of other regulators.

Ripple’s Woes

Ripple Labs was once regarded as a major force in the cross-border payments sector. The company promised to make payments cheaper, faster, and more efficient across international borders. For years, Ripple has faced criticism over its business model. Investors have sued it several times in the past. However, none of those lawsuits has caused the company to face an existential crisis like the one it is currently facing.

Immediately after the SEC lawsuit was announced, the price of XRP fell by around 5%. If the $1.3 billion lawsuit by the SEC were to succeed, Ripple Labs could be forced to shut down XRP for good. It would be a huge blow to the company. However, the company has created other products outside of the XRP network. It is unclear if these products would continue to thrive. Investors and institutions are often wary of firms that have crossed paths with the SEC.

The immediate effect of the lawsuit was that various crypto exchanges in the US dropped XRP trading. Others around the world have issued warnings to their clients regarding the regulatory risking of holding XRP. Besides that, various payment services that support crypto payment such as crypto currency payment gateway providers have dropped XRP from their offering. Additionally, firms that accept crypto payments online have dropped XRP from their list of accepted coins.

Japan Stands with Ripple

Before the FSA announced its decision on XRP, the Nomura Research Institute published an article in which it demonstrates that XRP is not a security under Japanese law. Additionally, SBI Group, one of the biggest players in Japan’s financial sector, published a statement in support of Ripple Labs. It stated that it considers Ripple Labs a business partner with whom it works to develop the future of payment infrastructure using the blockchain. It stated that it agreed with the findings of the Nomura Research Institute. Consequently, it did not consider XRP to be a security but a cryptocurrency.

While many crypto exchanges in the US and around the world have dropped XRP, most exchanges in Japan have refused to do so. They state that under Japanese law, Ripple XRP is considered a cryptocurrency and not a security.

Summary

Japan has some of the most comprehensive rules regarding crypto regulation in the world. It was amongst the first to recognize crypto as an accepted payment method. It is not surprising that Japan supports Ripple Labs since the company has deep ties with many firms in the nation. The UK’s FCA also issued a research paper in 2019 in which it stated it did not consider XRP to be a security.