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Ripple Labs’ cryptocurrency tumbled Tuesday after MoneyGram said it paused its relationship with the tech firm while it battles the feds in court.
The price of XRP — the digital coin at the center of a Securities and Exchange Commission lawsuit against Ripple — sank nearly 22 percent to roughly 47 cents as of 2:10 p.m. after MoneyGram revealed that it suspended trading on Ripple’s platform.
The two companies struck a deal in 2019 in which MoneyGram used XRP to settle cross-border payments while Ripple paid the company “market development fees,” which totaled about $50 million last year.
But MoneyGram suspended the arrangement in December as the SEC accused Ripple of illegally raising more than $1.3 billion by selling the virtual coin, CEO Alex Holmes said Monday.
Holmes said the money-transfer giant wants to continue working with Ripple but decided to put the partnership on ice out of an “abundance of caution.”
“I certainly hope that they’re successful in their efforts with the SEC and that things go in the direction that they want,” Holmes said on a Monday earnings call. “I would say that right now, we’re pausing those activities.”
Ripple said its multi-year contract with MoneyGram is still in place. The embattled firm noted that some market participants were “reacting conservatively” to the SEC’s lawsuit, which it said has “needlessly muddied the waters and introduced more uncertainty in the market.”
“We look forward to finding a path forward with MoneyGram and have confidence that there will be more regulatory clarity in the US for the use of digital assets and blockchain technology at the end of this lawsuit,” Ripple said in a statement.
Ripple and the SEC have agreed to take the case to trial before a jury in Manhattan federal court, according to a Monday filing in the case.
At the heart of the case is whether XRP — the world’s seventh-largest cryptocurrency by market value — is a security, like a stock, that has to be registered with the SEC under federal law.
The SEC alleges that Ripple CEO Brad Garlinghouse and co-founder Christian Larsen personally sold about $600 million worth of XRP while the company skirted disclosure rules meant to protect investors.
But Matthew Solomon, a lawyer for Garlinghouse, claimed in a Monday court hearing that the SEC failed to tell “ultra sophisticated market actors” that it believed XRP was a security as recently as 2019, according to Law360.
“This entire case is a gross overreach,” Solomon reportedly said.
XRP’s Tuesday slump came amid a broader selloff in the crypto market that saw bitcoin, Ether and Dogecoin fall deep into the red.