Senior Digital Assets and Blockchain Industry Subject Matter Expert, National Attest Office, CBIZ Advisors LLC
What is the blockchain trilemma, and how does it relate to digital assets?
The blockchain trilemma refers to the challenge of simultaneously achieving scalability, decentralization, and security within a blockchain network, often requiring trade-offs between these three aspects. This trilemma impacts digital assets by forcing developers to balance the three elements to ensure the efficient and safe transfer and storage of the digital assets. The trade-offs can influence the performance of digital asset platforms, affecting their perception, regulatory outlook, and value.
(For more on blockchain generally, see Blockchain and Distributed Ledger Technology (DLT): Overview on Practical Law.)
What are some of the main categories of digital assets that have emerged since Bitcoin was first introduced in 2009?
Since Bitcoin’s introduction in 2009, it has emerged as a digital asset class of its own. It is considered by many to be the premier choice for users opting for asset decentralization, scarcity, and security and accounts for nearly 61.2% of the $3.72 trillion total market cap of the global digital assets market as of August 1, 2025. (See CoinMarketCap: Cryptocurrency Prices, Charts, and Market Capitalizations.) Other categories of digital assets that have emerged include:
What are some factors that influence the price of digital assets?
The price of a digital asset is influenced by a variety of factors. For example:
What risks are linked to the total supply of a digital asset?
The total supply of a digital asset and its initial distribution, known as tokenomics, significantly affect its risk profile. A few individuals or entities holding a large portion of a digital asset can lead to high price volatility and make the market susceptible to manipulation. These holders can influence the market significantly by making large trades that affect the digital asset’s price.
Conversely, a well-distributed supply of a digital asset can improve liquidity and market stability. This distribution reduces the likelihood of drastic price fluctuations and creates a more predictable investment environment. Therefore, understanding how tokens are distributed is a crucial factor for assessing the risk associated with a digital asset.
The distribution of tokens over time depends on factors such as:
Both vesting periods and emission schedules directly influence the total supply of a digital asset by controlling the flow of tokens into the market, helping to prevent oversupply and potential value dilution.
What factors do regulators consider before approving spot exchange-traded funds (ETFs) applications for digital assets?
Historically, ETFs needed approval by the Securities and Exchange Commission (SEC) before they could be sold to the public. Initially, the SEC rejected spot Bitcoin ETFs to protect investors from market manipulation (see Reuters: US SEC Expected to Drag Its Feet on New Wave of Crypto ETFs (Feb. 27, 2024)). The SEC maintained for many years that the market is too inefficient to support a product like the Bitcoin ETF given Bitcoin’s price volatility and association with criminal activity (see Forbes: How the Bitcoin ETF Approval (or Not) Process Works at the SEC (Oct. 22, 2023)).The SEC’s stance on whether the asset was classified as a commodity or security was influenced by various factors.
However, the regulatory stance on Bitcoin changed in 2023, after the US Court of Appeals for the District of Columbia determined that the SEC did not adequately justify its disapproval of a proposed spot Bitcoin ETF, finding it to be materially similar to other Bitcoin futures ETFs that the SEC had previously approved. On January 10, 2024, following this court decision, the SEC chair acknowledged that circumstances had changed, and the SEC approved the listing and trading of several spot Bitcoin ETFs. The SEC noted that its approval required Bitcoin ETFs to include investor protections, such as full disclosure requirements and trading on regulated exchanges. (SEC: Statement on the Approval of Spot Bitcoin Exchange-Traded Products (Jan. 10, 2023); for more information, see SEC Approves Eleven Spot Bitcoin Exchange Traded Funds (ETFs) on Practical Law.)
Additionally, the SEC stated in Release No. 34-99306 that the Bitcoin ETF proposals they had previously denied were, in fact, consistent with Section 6(b)(5) of the Securities Exchange Act of 1934, which provides the rules and regulations applicable to national securities exchanges.
In July 2025, the SEC issued a 12-page guidance document on disclosure requirements for crypto ETFs. That same month, the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act was signed into law, establishing a federal regulatory framework for stablecoins — a significant legislative milestone for digital assets. The GENIUS Act supports broader crypto integration into financial markets, indirectly boosting confidence in crypto ETF approvals (SEC: Crypto Asset Exchange-Traded Products (July 1, 2025); Fact Sheet: President Donald J. Trump Signs GENIUS Act into Law (July 18, 2025)). The GENIUS Act supports broader crypto integration into financial markets, indirectly boosting confidence in crypto ETF approvals.
(For a tracker of recent SEC actions concerning ETFs, including the SEC’s criteria for approving ETF applications, see Crypto ETF Tracker on Practical Law.)
What is the relationship between the XRP Ledger (XRPL) and Ripple? How does XRP, the digital currency native to the XRPL, differ from other digital assets?
The XRPL was created in 2011 and launched in June 2012 by David Schwartz, Jed McCaleb, and Arthur Britto to improve on Bitcoin by developing a more sustainable digital asset platform specifically built for payments.Shortlyafter the XRPL first launched, Chris Larsen joined the team, and together they founded a company in September 2012 called NewCoin, which was eventually renamed Ripple. The XRPL founders gave 80 billion XRP to Ripple in exchange for it developing the XRPL. (See XRPL Website.)
RippleNet is a global network of financial institutions and payment providers that uses Ripple’s blockchain technology to enable seamless cross-border transactions. It aims to improve the global remittance system by offering a better alternative to the Society for Worldwide Interbank Financial Telecommunications (SWIFT) money transfer network (see Forbes: What Is Ripple (XRP)? (Apr. 16, 2024)). RippleNet operates on the XRPL, allowing secure and real-time fund settlements (XRPL: Learning Portal: RippleNet). It uses XRP to provide liquidity for cross-border transactions, removing the need for pre-funded accounts (see Cointelegraph: What Is Ripple: Overview, History, and XRP Cryptocurrency).This approach helps businesses save time and money by unlocking capital and reducing operational costs.
As of August 7, 2025, XRP is the third largest digital asset by market capitalization at over $182.4 billion (see CoinMarketCap: Cryptocurrency Prices, Charts, and Market Capitalizations).XRP can be purchased like other digital assets and used to pay transaction fees on the XRPL, similar to the way ETH is used on Ethereum. While XRP is not required to transact on RippleNet (any currency can be used to transact on RippleNet), it serves as a bridge to provide liquidity between different currency pairs (see Cointelegraph: What Is Ripple: Overview, History, and XRP Cryptocurrency).
XRP operates differently from other similar digital assets by using a consensus protocol involving 35 recommended participants called the Unique Node Lists. Each server operator can choose their validators, but the default configuration uses two listsprovided by trusted publishers like Ripple and the XRP Ledger Foundation, an independent nonprofit foundation that furthers the activity and development of the XRPL ecosystem. Ripple is one of the 35 validators, which some argue introduces more centralization compared to other digital assets. (XRPL: Consensus Protocol: Unique Node List (UNL).)
What were the issues underlying the SEC’s enforcement action against Ripple?
All 100 billion XRP tokens in existence were created at once, with 80 billion XRP given to Rippleand 20 billion XRP given to the founding team. In 2017, Ripple created an escrow system to control the release of 55 billion XRP in increments of 1 billion XRP released monthly over 55 months. (XRPL: An Explanation of Ripple’s XRP Escrow (Dec. 15, 2017).)
In 2020, the SEC initiated an enforcement action against Ripple’s parent company, claiming that Ripple sold XRP as an unregistered security. The SEC argued that Ripple and its leaders, Christian Larsen and Bradley Garlinghouse, failed to register their ongoing securities offering of billions of XRP, thereby depriving investors of material information about XRP and Ripple’s business. According to the SEC, Ripple created an information gap that allowed Ripple to sell XRP without fully disclosing all relevant information. (SEC: SEC Charges Ripple and Two Executives with Conducting $1.3 Billion Unregistered Securities Offering (Dec. 22, 2020).)
Ripple denied the SEC’s claims, arguing that XRP is not a security but rather a digital currency designed for facilitating fast, low-cost cross-border payments. In a partial victory for Ripple, the court held that XRP sold on digital asset exchanges is not a security, but Ripple’s sales of XRP directly to institutional investors constituted an unregistered securities offering in violation of the securities laws (SEC v. Ripple Labs, Inc., 682 F. Supp. 3d 308, 324-25 (S.D.N.Y. 2023)).
On October 2, 2024, digital asset manager Bitwise filed a registration statement with the SEC to launch an XRP ETF, the first of its kind (see Fox Business: Crypto Asset Manager Bitwise Files for First XRP Exchange-Traded Fund (Oct. 3, 2024)).
After a long battle, the SEC filed a settlement agreement in May 2025 initiating a resolution for the SEC’s civil enforcement action against Ripple resulting in a $125 million civil penalty (SEC: Ripple Labs, Inc., Bradley Garlinghouse, and Christian Larsen (May 8, 2025)). On August 7, 2025 the SEC filed a Joint Stipulation of Dismissal “that dismisses the Commission’s appeal and Ripple’s cross-appeal pending in the United States Court of Appeals for the Second Circuit, and resolves the Commission’s civil enforcement action against Defendants” (SEC: Ripple Labs, Inc., Bradley Garlinghouse, and Christian A. Larsen (Aug. 7, 2025)). This resolution ended the four-year legal battle and prompted a surge in XRP’s price.
(For more on determining whether digital assets qualify as securities under federal securities laws, see Determining Whether Digital Assets Are Securities on Practical Law.)
How much of XRP is being used for its intended cross-border payment platform?
Ripple is confident that US banks and other financial institutions will adopt its cross-border payments solutions (see CNBC: Ripple Says U.S. Banks Will Want to Use XRP Cryptocurrency After Partial Victory in SEC Fight (July 17, 2023)).Currently, more than 300 global financial institutions have used RippleNet to complete payments, which are recorded on the XRP Ledger (see Yahoo Finance: XRP to $5 in 2025? 5 Reasons this is Likely a Pipedream Rather than a Realistic Price Target (Aug. 1, 2025)). Notable users include Bank of America (USA), Canadian Imperial Bank of Commerce (Canada), Itaú Unibanco (Brazil), Kotak Mahindra Bank (India), and Santander (USA) (see Amazon Web Services: AWS Partner Profile: Ripple). Santander has processed more than 450 million euros on RippleNet in several countries. By contrast, SWIFT is used by over 11,000 banking institutions in more than 200 countries, with an average of 42 million SWIFT messages sent daily in 2021 (see Stripe: What is SWIFT? What to Know About the International Banking System (Jan. 23, 2025)).
Further, on December 17, 2024, Ripple announced the introduction of Ripple USD (RLUSD) in a post on X, describing it as “[a]n enterprise-grade stablecoin built for everyone, $RLUSD combines fiat stability with blockchain efficiency” (Ripple on X (Dec. 17, 2024)). RLUSD expands RippleNet’s flexibility by offering a regulated stablecoin for institutions hesitant to use XRP due to its price volatility. Notably, RLUSD transactions on the XRPL burn small amounts of XRP as fees, reducing XRP’s circulating supply (see Yahoo Finance: XRP Surges 13% as Ripple Launches RLUSD Stablecoin and Whale Activity Intensifies (Dec. 18, 2024)). Ultimately, participants in RippleNet can choose whether to use XRP for cross-border payments, depending on their preference for the on-demand liquidity feature.
