Attorney Morgan says XRP burns are hardly security.
As the Ripple lawsuit approaches its end, top lawyers have continued to debate whether XRP itself is a security. In a debate yesterday, Australian-based lawyer Bill Morgan mentioned XRP burns to prove that not all XRP-related transactions are securities.
Fagel Makes a Case for the SEC
Yesterday, while reacting to Morgan’s tweet, former SEC lawyer Marc Fagel said something needs to be a security for liability to be found. Fagel stated that the instrument could be a security through how it is offered and sold by the company.
He pointed out that Section 5 of the Securities Act requires the unregistered sale of a security.
Reacting to Fagel’s opinion in a thread, attorney Morgan told the former SEC lawyer that the “instrument” on a native Layer-1 (L1) blockchain, like XRP Ledger (XRPL), has no relationship with investing.
The pro-XRP lawyer noted that most L1 crypto assets are used to pay transaction fees or reward validators who secure the network, adding that these assets do not need to be offered by the issuers.
According to Morgan, an issuer can give a significant amount of an L1 crypto asset as airdrops to its community. He added that even the United States Securities and Exchange Commission acknowledged the utility aspect of XRP in the ongoing Ripple lawsuit. However, the SEC still pointed out that XRP utility is limited.
XRP Burns Are Hardly a Security
Furthermore, attorney Morgan disclosed that he once used XRP to purchase a cap. Following the completion of the transaction, he said a part of the amount of XRP he paid for the cap was burnt in the process.
Although the amount of XRP burned was very little, attorney Morgan said the incinerated coin, which was less than a cent, is hardly a security.
“That is why the notion that XRP itself, when not sold or offered, is a security is nonsense,” Morgan added.
XRPL Burn Mechanism
It bears mentioning that the XRPL, the underlying network of XRP, has a burn mechanism that incinerates all XRP collected as fees.
The XRPL’s burn mechanism was not designed to create scarcity in order to boost the coin’s price. It was created to address spam transactions, thus keeping the network secure.