XRP (CRYPTO: XRP) is the native digital asset on the XRP Ledger, the blockchain created by financial technology company Ripple to simplify cross-border transactions. XRP peaked around $3.30 in January after advancing more than 550% following the presidential election in November.
The token has since retraced its way to $2.55 as of Feb. 18, declining 20% from its January high, as excitement about Donald Trump’s victory has faded. However, XRP is still the third largest cryptocurrency by market value behind Bitcoin and Ethereum, and its price could increase if more financial institutions adopt Ripple Payments.
Should you buy XRP while it trades below $3? Here are the important details.
The Securities and Exchange Commission (SEC) in December 2020 sued Ripple for selling XRP tokens as unregistered securities. Specifically, the lawsuit alleged the company raised $728 million from institutional investors and $757 million through exchanges, and that all transactions qualified as illegal securities sales.
In July 2023, a U.S. district court issued a split ruling. Judge Analisa Torres said the direct transactions with institutional investors were unlawful, but XRP transactions on digital exchanges did not violate the law. The judge ordered Ripple to pay the SEC $125 million, far less than the $2 billion the SEC wanted.
In October 2024, the SEC appealed the district court’s ruling, and the agency has since submitted an opening brief, reasserting its belief that XRP sold on digital exchanges violated the law. Ripple is expected to file its opening brief by April 16, 2025.
The ongoing legal battle between the SEC and Ripple is a major drawback for XRP investors. Ripple Payments is unlikely to see significant adoption among banks and other payment services companies until the lawsuit is resolved.
President Donald Trump promised to support the cryptocurrency industry throughout his recent campaign, and he has taken steps to keep those promises during his first month in office. In January, he signed an executive order that created a working group tasked with evaluating the creation of a national digital asset stockpile.
Additionally, Trump nominated pro-crypto hedge fund manager Scott Bessent as Treasury Secretary. Bessent told Fox News in July “Crypto is about freedom and the crypto economy is here to stay.” Trump also nominated Paul Atkins as SEC Chair. He has criticized the agency for not accommodating cryptocurrency companies under former Chairman Gary Gensler.
Importantly, while the Senate has yet to approve Atkins, the SEC has already changed tack with digital assets. In January, the agency acknowledged it had primarily used enforcement action to regulate cryptocurrency retroactively, rather than crafting clear rules up front. “The SEC can do better,” the press release stated.
Also, the agency formed a cryptocurrency task force to “draw clear regulatory lines, provide realistic paths to registration, craft sensible disclosure frameworks, and deploy enforcement resources judiciously.” That represents a dramatic shift from how the SEC dealt with cryptocurrency companies under Gensler.
Here’s the bottom line: While none of those changes benefit XRP specifically, the more favorable regulatory environment bodes well for the cryptocurrency. It may encourage more institutional investors to buy XRP, especially if the U.S. government creates a national digital asset stockpile. And it could lead the SEC to dismiss its case against Ripple.
Ripple’s payments network uses the XRP token as a bridge currency to move money across international borders quickly and cheaply. Specifically, transactions on the XRP blockchain are generally settled within seconds, and they cost as little as a fraction of a cent.
Comparatively, transactions sent through the Swift system — the most popular solution for cross-border payments — can take several days to settle. And because they usually involve at least one intermediary, and each entity charges a fee, transactions are more expensive.
Ripple recently enhanced its value proposition for banks and payments companies by launching a stablecoin called Ripple USD (RLUSD). The stablecoin is tied to the U.S. dollar, making it a less volatile bridge currency than XRP. Ripple will begin using RLUSD to facilitate payments for enterprise customers this year.
Importantly, XRP supply is fixed at 100 billion tokens, so increased demand will result in price appreciation. The RLUSD stablecoin could make that happen in two ways:
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Transaction on the XRP blockchain (even those involving the stablecoin Ripple USD) incur transaction fees that are paid in XRP.
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The stablecoin may bring more DeFi (decentralized finance) developers to the blockchain, and those transactions would also incur fees in XRP.
Additionally, several asset managers have requested permission from the SEC to introduce spot XRP ETFs. Those funds would provide institutional and retail investors with a simple path to XRP exposure free from the hassle and fees associated with cryptocurrency exchanges.
Here’s the bottom line: XRP has several tailwinds at its back. Ripple simplifies cross-border payments, and its new stablecoin furthers that value proposition. Additionally, spot XRP ETFs could bring more investors to the market, driving its price up. But greater adoption of Ripple Payments and approval of XRP ETFs is unlikely while the SEC lawsuit remains an issue.
Until the legal battle is resolved, I doubt XRP will experience a lasting breakout above $3. On the bright side, that creates an opportunity for risk-tolerant investors to buy a small position today. Just remember that cryptocurrencies are volatile assets, and there is no guarantee XRP will be worth more in the future.
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Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and XRP. The Motley Fool has a disclosure policy.
Should You Buy XRP (Ripple) Right Now While It’s Under $3? was originally published by The Motley Fool
