While Ripple, one of the most sizable blockchain and cryptocurrency companies, has been selling off its XRP asset holdings, valued in the hundreds of millions of dollars, its cofounder is blazing a different trail over at his present operation. After leaving Ripple several years ago, Jed McCaleb went on to cofound Stellar in 2014, which has a similar crypto asset named XLM. As chatter circulates regarding the status of many crypto assets, such as Stellar’s XLM and Ripple’s XRP, as potentially unregulated securities, Stellar has decided to give away roughly $124 million in XLM, seemingly contrasting Ripple’s selling.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Today, Stellar announced a massive giveaway in cooperation with Keybase, a group messaging, community and file transfer hub, Stellar Development Foundation CEO Denelle Dixon said to me in an interview. “In partnership with Keybase,” today, Stellar unveiled its “largest airdrop” to date, Dixon said. “Keybase, as a result of that, will be giving away up to 2 billion XLM over the next 20 months,” she added. “It’s pretty exciting, because it’s to all of their Keybase users.”
An airdrop essentially is just a way to disperse a crypto asset, sometimes for free, to various participants. If done in tandem with certain regulatory and compliance measures, while utilizing proper licensing, an airdrop may ease U.S. Securities and Exchange Commission (SEC) concerns, according details from a CoinDesk story. The situation may, however, still depend on proper registration of assets as securities, if necessary, as well as certain “disclosures,” as noted in an SEC case back in 1999, detailed by CoinCenter in 2017.
Valued at just over $0.06 per XLM at the time of writing, according to Messari.io’s data, 2 billion XLM equates to a sizable chunk of cash. With regards to reasons for the giveaway, Dixon referred to the Stellar Foundation’s values. “I think that that has to do with who we are as a foundation,” she said. “SDF [Stellar Development Foundation] was founded in 2014 as a nonprofit, non-stock entity,” she explained.
“Our focus is global financial inclusion using blockchain and other technologies, focusing on the unbanked, and so from our stand point, what this kind of thing does as an airdrop, is it actually brings more attention to the ability for technologies like this to be able to effectuate nicely, cleanly and efficiently, cross-border transactions to help the unbanked and others out there in the world.”
Stellar’s giveaway appears slightly different than the situation over at Ripple. As quoted in The Block’s research, as of April 25, 2019, Ripple had “cumulatively sold $890 million of XRP.” Ripple’s second quarter reports, published on July 24, 2019, revealed the company sold $169.42 million in XRP in Q1 this year, and $251.51 million in XRP in Q2.
Unclear Regulatory Waters
Over the past two years or so, the SEC has begun peering into the formerly largely unregulated crypto and blockchain space. Much uncertainty still exists in terms of which crypto assets might officially be deemed as securities by the governing body. As of now, bitcoin seems to be off the hook, labeled as a commodity, although the waters may still be murky for other assets, such as XLM and XRP.
Playing the role of a skeptic, one might question whether or not this XLM giveaway might help Stellar avoid SEC concerns that XLM might be a security.
Dixon, however, responded,
“We don’t even have that as a thought process for us [...] We’ve been giving XLM away since our inception in 2014, so from our standpoint, the giving away of the XLM is our mandate, and it’s one of the things that was originally set up with respect to the mission and how the organization was going to make its mark on the world. We maintain and support the development of the codebase for the Stellar network, and in order to bring attention and focus and education to the Stellar network and blockchain technology, this is a great way to be able to do that [...] Our focus is on that part versus anything else that might have been. We’re not doing anything for any regulatory piece.”
In terms of XLM as a potential security, Dixon noted Stellar will “work” with regulatory bodies on the topic of XLM, but also added that they aren’t “worried.” “We will work with regulators to the extent that we need to on all of these issues,” she said. “I’m not concerned about the way that we manage,” she added. “We don’t actually focus on XLM for any other purpose other than to effectuate the network, and to bring good to the network and good to the world,” she said. She also added that Stellar has conducted “outreach” to regulatory players for discussion on the “technology.”
Keybase’s Role In The Equation
Keybase, according to its website, is a free group messaging, community and file transfer hub touting encryption for user protection. Keybase cofounders Max Krohn and Chris Coyne also built two other successful endeavors; SparkNotes and OkCupid.
SDF initially partnered up with Keybase back in 2018, Cathy Corwin, a spokesperson from Inkhouse, Keybase’s PR agency, said. “We definitely expect the Airdrop will bring new users to Keybase,” she said.
In May 14, 2019, Keybase detailed its platform’s integration with XLM in a blog post. Essentially, using cryptocurrencies can appear complicated, sending assets to addresses composed of long strings of letters and numbers. Additionally, the post noted potential risks associated with “social engineering hacks.” The post explained that Keybase brings security to the mix and integrates the ability to send XLM from one person to another, in a simpler fashion on its platform.
“Keybase is linking strong cryptography to real-world identity, and our partnership with the Stellar Development Foundation means that users can interact with people financially in the same way they do socially without worrying about hackers or data breaches,” Corwin explained.