The most recent hearing of Ripple’s case with the US Securities and Exchange Commission (SEC) was held on March 19. During the session, the SEC attorney made a remark, which could result in XRP being relisted on exchanges. This development would be fortunate for the company, as they feel its token is an ideal bridge currency for forthcoming CBDCs.

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Judge Leaning Towards XRP

In December, the SEC filed a case against Ripple and executives Christian Larsen and Brad Garlinghouse. They cited Section 5 of the Securities Act of 1933, which prohibits the sale of unregistered securities. This is what the SEC asserts is what Larsen and Garlinghouse did.

During the hearing on March 19, Magistrate Judge Sarah Netburn asked SEC attorney Jorge Tenreiro about the application of Section 5. “So, presumably every individual in the world who’s selling XRP would be committing a Section 5 violation,” she queried. Tenreiro clarified, saying that Section 4 of the Act was an exemption provision.

“If these are transactions by people in the market, they’re exempted by statute,” he said. “Under Section 4, only Ripple and affiliates of Ripple can have sold XRP illegally,” he continued. This could set a precedent that would enable exchanges to begin listing the token again.

Judge Netburn also called into question the argument that the asset is a security. “My understanding about XRP is that not only does it have a currency value, but it has a utility, and that utility distinguishes it from Bitcoin and Ether,” she said. As currencies and securities are distinct, the SEC’s argument that XRP is a security could be losing its credibility. 

XRP as a Neutral Bridge Currency

This could bode well for Ripple, as the company feels that XRP could be an ideal neutral bridge currency for CBDCs. Recently, Ripple released a whitepaper entitled ‘The Future of CBDCs.’ The whitepaper explains why central banks should issue CBDCs and describe issues they would potentially have to overcome.

Because central banks will have their own priorities when establishing a CBDC, they may take a different approach for each. However, CBDCs will still need to be exchanged across the global market. Ripple says this interoperability will require open payment protocols and neutral bridge assets. Companies have already used XRP for foreign exchange, so Ripple explained that XRP would be a natural choice to be a neutral bridge asset. This could see XRP become a standard global cryptocurrency for CBDC exchange.