In 2020, the U.S. Securities and Exchange Commission (SEC) sued a company called Ripple, saying it violated the law in the way it issued its shares XRP (XRP 8.12%) Cryptocurrency. The two parties were locked in a bitter legal battle until it was partially resolved in 2024, but it’s not officially over yet (more on that in a moment).

XRP has a market capitalization of more than $150 billion as of this writing, making it the third most valuable cryptocurrency in the world. But just a few months ago it was only worth a fraction of that – since Donald Trump’s US election victory on November 5th, the token has risen by more than 400%.

Trump is forming possibly the most crypto-friendly administration in US history, so investors are speculating that Ripple’s regulatory problems could soon disappear. Does this mean you should buy XRP before the president-elect takes office on January 20th?

XRP was developed for the Ripple Payments network

The global banking system is complex and not every institution uses the same infrastructure to process transactions. Some major banks use the SWIFT (Society for Worldwide Interbank Financial Telecommunication) network to transfer funds between each other, but many do not, which can lead to delays in processing transactions.

Ripple developed the Ripple Payments network to solve this problem. It standardizes payment protocols so that banks can “talk” to each other, even if they use different infrastructures. Put simply, you can use Ripple Payments to eliminate intermediaries and process transactions directly with each other – instantly.

Ripple introduced the cryptocurrency XRP to standardize these transactions. For example, an American bank could send XRP to a Korean bank instead of sending US dollars to avoid exchange rate costs and other transaction fees. The two banks can then convert their XRP into a fiat currency of their choice.

This means that, unlike most cryptocurrencies, XRP has a real use case that could support its value in the long term.

Why was Ripple under such scrutiny from the SEC?

There are 100 billion XRP tokens. Around 57 billion are circulating in the market, where they can be traded on crypto exchanges. The other 43 billion tokens are held by Ripple, which releases small amounts each month to meet demand from institutions.

Therefore, XRP is very different from a decentralized cryptocurrency such as Bitcoinwhich has a fixed supply cap and is not controlled by any company or individual.

This is one of the reasons why the SEC sued Ripple in 2020, arguing that XRP should be classified as a financial security (like a stock or bond). Issuers of securities must register them and are subject to strict rules, so this lawsuit had serious consequences for Ripple’s business.

But in August 2024, a judge ruled that XRP could only be a security under certain circumstances, such as when Ripple issues new tokens to institutions. However, XRP could not be a security when used in transactions or traded on crypto exchanges. Ripple’s penalty was a $125 million fine, which investors saw as a victory – but the SEC is appealing the decision, leaving the company facing several more years in court.

That’s why XRP skyrocketed after Trump’s election victory. The President-elect has already nominated Paul Atkins to head the SEC (subject to Senate approval). Atkins is co-chair of an organization called Token Alliance that advocates for the crypto industry and is therefore a big proponent of digital assets.

Under Atkins’ leadership, it is possible that Ripple’s battle with the SEC will quickly come to an end after January 20th.

Image source: Getty Images.

Should you buy XRP before January 20th?

Banks and financial institutions do not do this have to use the XRP token to use the Ripple Payments network. You can also transact in fiat currencies with the benefit of instant settlement. This means that the success of Ripple Payments does not necessarily translate into a higher value for XRP.

Therefore, while a friendlier SEC will almost certainly benefit Ripple, it might not lead to as big an upside in XRP as investors think. Finally, despite its recent surge, the token has still not surpassed its 2018 record high of $3.40.

It is entirely possible that XRP could continue to rise in 2025 based on positive investor sentiment alone. It will be a powerful thing to have a crypto-friendly US government in office, especially if it puts forward new initiatives to benefit the industry. However, further increases in XRP in particular would be driven primarily by speculation, which is not a recipe for sustainable long-term value.

Keep in mind that XRP collapsed by more than 90% after its peak in 2018, and there is nothing stopping this from happening again. Therefore, although the token could continue to rise from here, I do not believe it will be a safe investment before or after January 20th.