A primary attraction of decentralized cryptocurrencies is that they’re censorship-resistant. The more centralized a coin is, the easier it is for its supply to be controlled. But there’s another problem with overly-centralized cryptocurrencies such as ripple: they risk being classified as a security, which brings all kinds of problems.
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How Centralized Must a Cryptocurrency Be Before It Becomes a Security?
Ripple has long been criticized for its centralization. These concerns have revolved around the degree to which Ripple, or its partner exchanges – aka Ripple Gateways – have the power to freeze and reverse transactions. Ripple’s greatest centralization problem may owe less to the way its nodes operate, however, and more to the amount of coins held by the company. Given that Ripple owns the majority of all XRP, the argument goes, anyone buying the coin is essentially buying shares in the company.
Many cryptocurrencies are the product of an incorporated company, but these companies don’t generally hold the bulk of the supply. For months, Ripple was regarded as a stick-on to become the next coin listed by Coinbase. But as news.Bitcoin.com recently reported, “Ripple may not qualify because Coinbase decrees it essential that “the ownership stake retained by the team is a minority stake””. This week, it emerged that Ripple had tried to buy its way onto Coinbase and GDAX, only for its $1 million sweetener to be rebuffed by the U.S. exchanges. There’s a certain irony in a centralized exchange not wanting to accept a coin because it’s too centralized.
Exchanges Don’t Want Securities
On Thursday, Binance moved fast to delist centra after the coin’s founders were arrested and the SEC’s investigation
