XRP Risk

Ripple (XRP)

INTRODUCTION
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‍There have been no expressed opinions by a regulatory authority in Canada about Ripple or any of the other Crypto Contracts or Crypto Assets made available through Satstreet Inc., including an opinion that Ripple itself is not a security and/or derivative. There may be sudden changes without notice to applicable laws that may adversely affect the value, use, transfer, or exchange of any of your crypto assets. The statutory rights of action for damages and the right of rescission in section 130.1 of the Securities Act (Ontario) and similar legislation in the other provinces and territories of Canada would not apply in respect of a misrepresentation in this Crypto Asset Statement or the Satstreet Inc. Services Risk Statement. The below provides a summary of risks associated with Ripple and is not a complete list of all risks and does not take into account an individual’s specific risk tolerance or situation. Investors are encouraged to conduct their own research prior to trading any crypto asset. Satstreet Inc. clients should read the Satstreet Inc. Services Risk Statement for the general risks associated with crypto assets made available through Satstreet Inc.
A copy of the Satstreet Services Risk Statement is available at https://satstreet.com/services/risk-statements
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DESCRIPTION

XRP is a crypto asset designed to migrate transactions from central databases controlled by financial institutions to a more open infrastructure while significantly cutting costs. XRP transactions are instant and cheap for cross-border movements. Launched in 2012, the software enabling the use of XRP, the XRP Ledger, proposed a new way of operating blockchains that proponents claim is more suitable for transactions. The XRP Ledger only allows select network participants to help validate transactions and secure the network. There are over 150 of these participants in the network, collectively known as the Unique Node List (UNL). At launch, 100 billion XRP tokens were 'premined' and subsequently distributed to specific individuals, companies and the general public through gifts and giveaways. At the time, the move led to concerns surrounding its decentralization, as a few entities controlled a large supply of the coins.In addition, XRP’s involvement in the market relies on a for-profit company called Ripple, which to this day acts as the main player in the XRP ecosystem. Ripple helps maintain the XRP Ledger and plays a pivotal role in its development while being a significant XRP token holder. The XRP Ledger was initially called the Ripple open payments system and moved to the Ripple Consensus Ledger, before becoming the XRP Ledger.After the XRP Ledger was functioning, its developers gifted 80 billion tokens to a private company that would work with the community to support the cryptocurrency. XRP was initially the ticker symbol for “ripples” or “Ripple credits,” but over time, these names were dropped in favor of just XRP to avoid confusion.This analysis is based solely on the regulatory guidance, decisional authority, and current state of the case-law publicly available as of the date of this publication, and does not speak to regulations or regulatory interpretations that are promulgated following the date of last update of this publication. There remains regulatory and legal uncertainty with respect to XRP’s status as a security as Ripple Labs and the United States Securities and Exchange Commission (the “SEC”) are currently engaged in litigation. In December 2020, the SEC filed a lawsuit against Ripple Labs, alleging that its sale of XRP — the native token of XRP Ledger that powers Ripple’s payment network — constituted an offering of unregistered securities worth over US$1.38 billion. It is difficult to product how various regulatory bodies and courts could react to any set of facts and it is possible that the Ontario Securities Commission (the “OSC”) or another relevant regulatory authority could take a position contrary to the analysis in this Memorandum. If facts were to change or new regulatory guidance, legislation, or decisional authority were to be issued, the conclusions in this Memorandum may become outdated. Based on the foregoing and as further described herein, XRP does not appear to meet the qualifications as a “security” under Canadian securities laws.
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Ripple (XRP) : https://ripple.com/files/ripple_consensus_whitepaper.pdf
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RISKS OF XRP

Any investment in cryptocurrency and digital assets, such as XRP, can include the following general risks:(i) volatility risk and liquidity risk(ii) short history risk(iii) demand risk(iv) forking risk(v) code defect risk(vi) regulatory risk(vii) electronic trading risk(viii) cyber security risk

For additional information of risks associated with cryptocurrency and digital assets, you may refer to the Satstreet Inc Services Risk Statement. In terms of specific risks, XRP has no central working group or authority to disclose material information to the public regarding XRP. Please note that these risks and the associated summaries or overviews provided for each herein are not intended to be a complete overview of all such risks and, in addition, there may be other risks that come with exposure to XRP. We encourage all users to perform their own due diligence to assess the risks associated with XRP and to determine whether this level of risk is acceptable to them. Neither XRP nor Satstreet guarantees the value of XRP, and holders of XRP will not have any recourse to XRP or Satstreet if the value of XRP declines for any reason whatsoever.

SATSTREET EVALUATION OF XRP

Satstreet Inc. has reviewed and assessed XRP prior to making it available through our services and has concluded that XRP is not a security or derivative under Canadian securities legislation; however, there is a risk that this conclusion could change in the future and that, in such event, Satstreet will be required to halt, suspend, and then remove XRP from its platform as described in the Satstreet Inc. Services Risk Statement.

Further, as indicated above, no Canadian securities regulatory authority has expressed an opinion about XRP, including an opinion that XRP is not itself a security and/or derivative. Based on publicly available information Satstreet has reviewed XRP, including, but not limited to, a review of the following: The creation, governance, usage, and design of XRP, including the source code, security, and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that created XRP. The supply, demand, maturity, utility, and liquidity of XRP. Material technical risks associated with XRP, including any code defects, security breaches and other threats concerning XRP and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them. Legal and regulatory risks associated with XRP, including (i) any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of XRP, and (ii) statements made by any securities regulatory authorities in Canada, other regulators in IOSCO-member jurisdictions, or the regulator with the most significant connection to XRP about whether XRP, or generally about whether the type of crypto asset, is a security and/or derivative.

Last Updated: June 2023

Risk Statements

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