Ripple XRP and Government Cryptocurrencies - Pros and Cons

Recently, the crypto industry was shocked by the news of an SEC litigation against Ripple XRP. The fintech company that relies on blockchain technology to build enterprise-level technology is still fighting in court up until this moment.

The fact is that this situation shows how the relationship between many government-related entities and cryptocurrencies is still not as cooperative as it should be.

Yet, many central banks are discussing the adoption of cryptocurrencies, while some even have already issued their own. So, should you buy Bitcoin or cryptocurrencies like Ripple for the long term?

In this article, you will discover all you need to know about independent and government-related cryptocurrencies, along with the pros and cons of each one.

Ripple and Government Cryptocurrencies - Pros and Cons
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What Happened to Ripple Recently?

In December 2020, the US Securities and Exchange Commission (SEC) charged the fintech company Ripple for raising $1.3 billion in an offering of allegedly "unregistered digital securities."

Following the litigation, some cryptocurrency exchanges removed Ripple's XRP from their platforms. Industry-leading exchange Coinbase also proceeded with the suspension of all XRP order books within their platform, although allowing users to deposit and withdraw the asset, which massively affected this cryptocurrency price.

Regardless, Ripple decided to fight against the litigation. According to Ripple's CEO, Brad Garlinghouse, the company is still considering the SEC action utterly wrong on the fact, and they are confident they will prevail before a neutral fact-finder.

In late March 2021, Judge Sarah Netburn of the Southern District Court in New York stated that her understanding about XRP is that "not only does it have a currency value, but it has a utility, and that utility distinguishes it from bitcoin and ether."

Ripple XRP vs. Government Regulation - What Do We Have to Learn With this Episode?

It is plain to see that government-related entities in many countries - including the United States - tend to have a more invasive approach when dealing with cryptocurrencies.

While many countries allow cryptocurrency trading, most are either skeptical about it or do not have specific legislation to address the subject. There are countries in which cryptocurrencies are not illegal, but banks ban them.

The situation gets even more complicated to understand when several central banks worldwide are starting to issue their own cryptocurrencies, despite the existence of a biased viewpoint among traditional banking entities and government authorities.

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Why Are there Governments Issuing Their Own Cryptocurrencies?

Several factors led to the decision made by some central banks that decided to issue their own cryptocurrencies, including the ever-growing interest in crypto assets and the innovative nature of blockchain technology.

Plus, the pandemic outbreak and the subsequent impact on the world economy also influenced the process. In times of economic uncertainty, people tend to pull their savings from commercial banks and seek alternative ways to store value.

China is an example of this process. Since 2014, the country has been working on the issuance of an "official" cryptocurrency. Other countries that have issued their own cryptocurrencies include Ecuador, Senegal, Singapore, and Tunisia.

The main reasons for the adoption of digital currencies by central banks include the possibility of delivering seamless cross-border transactions, providing payment stability, and financial inclusion for under-banked and bankless populations.

Plus, instead of losing users of traditional banking systems to an alternative financial system, government experts might believe that the best approach is to preclude "bank run" and keep users under the same entities but with different technologies.

Ripple XRP vs. Government Cryptocurrencies - Pros and Cons

Ripple's XRP, like many other independent cryptocurrencies, is still both a valuable asset and a form of digital money that can be used as payment means. However, how does it differ from government-issued cryptocurrencies?

Cryptocurrencies were created to allow individuals to perform P2P (peer-to-peer) transactions in a public ledger, with no centralized control whatsoever - including governments.

Government-issued cryptocurrencies can have advantages when compared to fiat currency, including easy asset transfers, seamless cross-border payments, and no risk of contamination by touching banknotes.

Yet, governments still tend to ban other cryptocurrencies to force investors to move out into national cryptocurrencies. For instance, China does not recognize other cryptocurrencies as legal tender, and its banking system bans such forms of digital assets.

Final Thoughts

The Ripple situation just demonstrates how government intervention and successive regulation attempts are not the way to go when it comes to the crypto industry.

Currently, despite the effort of many central banks to issue their own cryptocurrencies, it is unlikely that a massive move to a centralized digital asset will be well-received amid the crypto community.

While very few enthusiasts of the idea may argue that the adoption of cryptocurrencies by governments would help the crypto industry reach mass adoption, centralized banks will indeed control their digital assets in a similar way they control fiat currencies.

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