- The UK’s HM Treasury classifies XRP as an “exchange token.”
- The U.K. agency’s report classifies XRP “primarily” as an exchange token, along with Bitcoin and Ethereum.
While Ripple is facing a lawsuit from the SEC in the U.S. over the classification of XRP as a security, the UK provided clarity last week. According to a report published on January 07 by the HM Treasury, the UK government’s Department for Business and Finance, XRP is not a securities token.
In the document, titled “UK regulatory approach to crypto assets and stablecoins: consultation and call for evidence,” the British authority writes that cryptocurrencies serve a variety of functions, from trading digital collectibles to raising capital for new projects. At the same time, the report also states that there is no internationally agreed taxonomy or classification.
Back in 2019, the UK’s financial regulator, the Financial Conduct Authority (FCA) therefore published its “Guidance on Crypto-Assets,” which describes three broad categories of tokens in relation to them: E-money tokens, securities tokens, and unregulated tokens. Securities tokens, according to the statement, have characteristics similar to a specific investment, “such as a share or debt security, as defined in UK legislation.”
However, XRP does not fall under this category, according to HM Treasury. Rather, XRP belongs to the category of “unregulated tokens,” which can be further divided into “utility tokens” and “exchange tokens.” In this regard, the UK authority writes in the report:
Exchange tokens: tokens that are primarily used as a means of exchange – this includes widely known cryptoassets such as Bitcoin, Ether and XRP.
Further, the HM Treasury also notes that “many tokens can take a hybrid form and fall into different categories at different times.” For example, they may first be used to raise capital, then later be used primarily as exchange tokens.
Ripple’s contacts in the UK
In the XRP community, the news was received as massively bullish. Moreover, the UK Treasury’s stance underscores Ripple’s good relations with the UK. For example, Ripple CEO Brad Garlinghouse expressed in October that London could be a destination, along with Switzerland, Singapore, Japan and the United Arab Emirates in the event of an exodus from the US.
Furthermore, Ripple also maintains a good relationship with the central Bank of England, the Bank of England (BoE). As revealed in July 2017, the BoE was testing Ripple’s technologies for its next-generation real-time gross settlement (RTGS) system.
As part of the proof of concept (PoC), the central bank noted that Ripple’s solution “showed promise in enabling RTGS systems that are seamless and globally interoperable.” At the Yahoo Finance “All Markets” conference in 2018, Garlinghouse also confirmed that the BoE is “a paid customer of Ripple.”