Ripple’s Legal Chief Calls for SEC to Establish Clear Rules to Expedite XRP ETFs

Stuart Alderoty, Ripple’s Chief Legal Officer, has urged the SEC to establish clear guidelines regarding the classification of crypto tokens. In a letter to the SEC’s Crypto Task Force, Alderoty emphasized that most crypto tokens traded on the secondary market should not be categorized as securities. This request is perceived as part of Ripple’s strategy to launch XRP ETFs this year; without legal clarity, these efforts may be further postponed, and other assets might gain an edge over XRP. Currently, the market stands ready to embrace XRP, and ETFs could enhance its reach, much like they did for Bitcoin.

XRP Ruling Supports the Case

Referring to Judge Torres’s ruling in the SEC v. Ripple case, where the court determined that XRP sales on exchanges are not securities, Alderoty highlighted a legal paper by Lewis Cohen. This paper asserts that a token is only classified as a security if a clear relationship exists between the buyer and the seller, which doesn’t occur during token trades on exchanges.

New Rules Should Come From Congress

Alderoty believes that the SEC should refrain from creating new regulations independently. He argues that it is Congress’s responsibility to formulate laws for the crypto sector. By providing guidance grounded in existing legislation, clarity can be achieved for all stakeholders. While acknowledging the existing regulatory gaps in the crypto sphere, Alderoty firmly stated that the SEC lacks the authority to impose new rules unilaterally. He called for Congress to define a legal framework specifically designed for digital assets, emphasizing that regulatory clarity should originate from lawmakers, not from regulators exceeding their mandate.

Also Read: XRP News: Why Did Ripple Submit An Additional Letter To Crypto Task Force?

Possible Scenario for Security Status

In the meantime, Ripple has proposed a ‘network maturity’ test to determine whether a crypto token should continue to be viewed as a security. This test evaluates factors such as project growth, duration, and the distribution of control. Ripple posits that a token should be classified as a security only if two conditions are satisfied simultaneously: the original promises made by the issuer remain unfulfilled, and the current holder possesses legal rights to those promises. If these conditions are not met, the token should be regarded separately from the initial investment contract. This initiative is part of Ripple’s overarching aim to pave the way for a potential future ETF.

The Push for Fairer Crypto Rules Grows

Ripple’s request coincides with similar appeals from the Blockchain Association and other entities advocating for the SEC to cease imposing traditional financial regulations on crypto. With influential firms like BlackRock also engaging with the SEC’s Crypto Task Force, the demand for improved regulatory frameworks is only intensifying.

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FAQs

Why does Ripple believe the SEC is overstepping its authority?

Ripple contends that the SEC is overstepping by unilaterally trying to establish new regulations for crypto, arguing that such regulatory clarity should be the responsibility of Congress.

How would an XRP ETF affect the price or adoption of XRP?

An XRP ETF is anticipated to enhance the price and adoption of XRP by attracting institutional interest, increasing liquidity, and fostering overall market confidence, similar to the effects seen with Bitcoin ETFs.

How will U.S. investors be affected if Congress delays crypto regulation?

A delay in crypto regulation from Congress could result in prolonged legal uncertainty for U.S. investors and the market, potentially stifling innovation and widespread adoption.

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