- A crypto personality and AI founder speculates that Ripple may have already committed a huge chunk of the XRP supply held in escrow to ETF issuers.
- His theory ties into a Ripple top executive’s hint that the company can sell its rights to receive XRP tokens released from escrow to another party.
It’s already happening. A software engineer and AI (artificial intelligence) startup founder recently raised the possibility of what Ripple CTO David Schwartz hinted at earlier: Ripple has already begun selling its XRP in escrow, or at least has committed its delivery to institutions, particularly exchange-traded fund (ETF) issuers.
Ripple’s Advanced Selling of XRP in Escrow to ETF Issuers
The pseudonymous Vincent Van Code, a software engineer with a considerable social media following, recently reminded people that ETF fund managers can’t buy XRP directly from Ripple. This constraint stems from the previous ruling in the Securities and Exchange Commission (SEC) case against Ripple.
In 2023, Judge Analisa Torres of the Southern District of New York ruled that XRP, in and of itself, is not a security, as it does not qualify as such under the Howey Test. However, Ripple’s sale of the token to institutional investors constituted a sale of securities under the same legal benchmark. An exemption is Ripple’s circumvention of the court injunction through blind sales/programmatic sales, or open-market sales of the token.
Ripple’s Bypass to Institutional Sales
The software engineer’s inference is tied to Schwartz’s revelation that, although Ripple has no control over the XRP still locked in escrow, nothing prevents it from selling the rights to receive the tokens released from escrow to another party. It could also sell the accounts where the escrow directs the unlocked supply.
This way, Ripple does not violate its standing court order against the direct sales of XRP to institutions.
Effect on the Market
Van Code quashed expectations of sharp price spikes upon transfer of the unlocked XRP supply from escrow, though. According to him, the bypass won’t immediately yield to volatility in the token’s value.
The software engineer explained that there may be slight periods where the monthly escrow event won’t move prices, unless XRP demand volume significantly picks up from ETF flows. But then again, he said Ripple will only sell what it needs as it doesn’t want to pay a hefty capital gains tax on XRP sales, thus it might lock up the unutilized supply back into escrow.
Lastly, the crypto personality stated that everything is a balancing act, so rest assured that fund managers are closely coordinating with Ripple about the timing of the XRP transfers or sales.
