Ripple is Gaining More Regulatory Clarity, So Why is XRP Still Falling?

By AltIndex Research · 5 min read · August 28, 11:12 am

Many cryptocurrencies aspire to reach more regulatory-clear positions, and Ripple has recently been able to tick that box in important regions like Europe. But regulatory certainty for Ripple is not translating to price improvements for XRP, and some investors are wondering why.

An increasing point of frustration and friction for many advocates of cryptocurrency is the lack of regulatory certainty that they continue to experience. The way they are taxed, how businesses and investors can be compliant with regulations, what sort of licensing is required to handle them and other questions about the legal oversight of cryptocurrency operations are all things that continue to dog some of the biggest cryptocurrencies, in many cases leading to a stymying of growth.

Some cryptocurrencies are, finally, breaking that streak and reaching a point of regulatory clarity. Notably, Ripple has recently been fully authorized as a Crypto Asset Service Provider (CASP) in Europe, and has been confirmed as fully compliant with the European Union's Markets in Crypto-Assets (MiCA) regulatory framework. This means that it can offer its services as a regulated crypto service in all of the countries within the European Economic Area. But despite this, fans of Ripple who are tracking the XRP price live are seeing it continue to fall, even though it could be assumed that stronger regulatory certainty for Ripple would boost XRP in some way.

Let's take a closer look at the regulatory shift for Ripple in Europe, and why it doesn't seem to be affecting the price of XRP.

Ripple Attains Regulatory Certainty in Europe

Europe has, with MiCA, provided some of the most comprehensive and clear regulatory frameworks for cryptocurrency management in the world. This allows companies that wish to engage in operations related to cryptocurrency in the region to make plans and moves that are not based on theory, but rather concrete assurances of what they need to do to remain compliant and avoid regulatory pitfalls.

For Ripple, attaining a CASP authorization from the Luxembourg financial regulator, Commission de Surveillance du Secteur Financier (CSSF), is the opening of the door to the European market for the company. It allows them to partner with confidence with companies across all 30 of the countries in the European Economic Area.

Many traditional financial institutions, such as banks, payment companies and other such groups, view the new regulatory certainty of cryptocurrencies as the sign that now is the time to engage with cryptocurrency. These groups have been waiting for the regulatory clarity of MiCA and CASP before gaining exposure to any cryptocurrency services or investments.

With Ripple joining other fully MiCA-compliant digital asset firms, it is well positioned to become one of Europe's leading cryptocurrency firms.

Why Hasn't Regulatory Certainty Translated Into Higher Prices

You might think that the potential business future of Ripple improving would likewise improve the market price of XRP, and be confused as to why it hasn't. But the price of crypto remains largely at the whim of market sentiment, supply and demand, market liquidity and other macroeconomic factors. This means that even a big win for Ripple like this new European regulatory certainty is not enough on its own to push the price up.

The same sort of thing can be seen in traditional financial markets as well. While sometimes big news about a company will see its stock jump, other times it doesn't. There are likely broader economic reasons for the price of a stock or crypto to be where it is, and those conditions can take some time to reverse.

The Good News May Already Be Accounted For

A truism about financial markets is that they are always looking into the future. As such, price movements often occur before an event happens, as the market reacts to what is coming, as much as it reacts to what is happening. Especially when discussing positive developments, it's likely that they have been anticipated and accounted for months in advance.

Specifically with Ripple and its progress towards regulatory approval in Europe, this news is not a surprise. The confirmation is important, but it has been signalled for some time that this is the direction that Ripple has been headed in, and many investors and traders have already made the changes they deem worth making in reaction. The final announcement of the CASP authorization, even though it might be recently official, is not technically new.

Ripple And XRP Are Not Synonymous

It is also important to note that Ripple and XRP are not one and the same. They are closely tied together. Ripple develops a number of different payment solutions that use blockchain infrastructure for fast cross-border payments, which is why it is tipped to be so good in Europe, and XRP is a digital asset that Ripple prefers users to use within its ecosystem.

While they are fundamentally connected, just because Ripple, the company, is seeing success, that doesn't mean that XRP should increase in demand.

Especially when we consider the customer base that the CASP authorization will have provided Ripple with access to, traditional financial institutions like banks and payment providers, large-scale adoption of new XRP-fuelled systems could take years. As such, the positive effects of the recent regulation could take a long time to truly be felt by XRP.