Coinbase said it will suspend trading of XRP, the cryptocurrency the U.S. Securities and Exchange Commission sued Ripple Labs in regards to last week claiming it is really a security.
Coinbase first listed XRP on its retail-facing platforms in February 2019. Starting now, XRP trading “will move into limit only,” Coinbase wrote. It will be fully suspended on Tuesday, Jan. 19, 2021, at 1 p.m. ET.
“We will continue to monitor legal developments related to XRP and update our customers as more information becomes available,” Paul Grewal, Coinbase’s chief legal officer, wrote in a blog post shared in advance with CoinDesk.
Coinbase said users’ XRP wallets will “remain available for receive and withdraw functionality after the trading suspension.”
Notably, the exchange said it will still support an upcoming airdrop of Spark tokens to XRP holders. XRP will still be supported by Coinbase Custody and in the self-custodial Coinbase Wallet.
Coinbase declined to comment beyond its written statement.
The price of XRP on Coinbase tanked from $0.28 to $0.24 within the first 20 minutes of the announcement. Since the announcement of the SEC’s lawsuit last week, the price of XRP has fallen by more than 50%.
Ripple effect
For Coinbase, the reason for dropping XRP as a traded asset was simple: As the company seeks to go public, being a platform for something that’s potentially a security would mean adding more paperwork simply so it could be legally allowed to let retail customers buy and sell a single cryptocurrency.
The SEC claimed last week that XRP is a security, and that Ripple has been selling it without registering or seeking an exemption for seven years, raising $1.3 billion in the process. The legal battle itself is just beginning, and litigation might take years if Ripple fights the charge in court, as it has indicated it would.
Coinbase is now the biggest exchange to act on XRP and could serve as a bellwether for other platforms. On Friday, Bitstamp announced it would halt XRP trading and deposits for all U.S. customers on Jan. 8.
Similarly San Francisco-based OKCoin announced its XRP suspension earlier Monday, effective Jan. 4.
Exchanges that continue to list XRP without registering as a securities exchange with the SEC face potential consequences down the line, including possible enforcement actions. However, should Ripple prevail in its defense, Coinbase can likely re-list XRP fairly easily.
Alex Kruger, a trader and analyst, said, “Crypto exchanges are unregistered with the SEC (by choice, as registering carries on many burdens and increased costs) and thus it is in their best interest to not offer trading of securities. It is for their protection, not their customers’.”
Gabriel Shapiro, an attorney with Belcher, Smolen & Van Loo LLP, told CoinDesk last week that the question of whether exchanges should delist is a complicated one, with both business and legal considerations.
UPDATE (Dec. 28, 23:35 UTC): Adds XRP price reaction.