- Urges SEC for clear digital asset regulations, criticizing past approach
- Argues SEC lacks authority over most digital assets, Congress should lead
- Suggests safe harbors and regulatory sandboxes for crypto innovation
Ripple has submitted a formal response to the U.S. SEC Crypto Task Force, urging the agency to clarify its approach to digital asset regulation. In a letter addressed to Commissioner Hester Peirce, Ripple criticized the SEC’s past leadership for creating confusion and called for a return to straightforward, lawful guidance.
Stuart Alderoty, Ripple’s Chief Legal Officer, shared the document on X, emphasizing the need for regulatory relief. He referenced the Bob Dylan lyric, “There’s too much confusion, I can’t get no relief,” arguing that the previous SEC administration used this uncertainty to justify enforcement actions against crypto companies.
Ripple’s Core Arguments Against the SEC’s Approach
Ripple asserts that the SEC oversteps its authority over most digital assets, arguing they don’t meet the legal definition of securities. The company maintains that it is Congress, not the SEC, that should establish rules for the crypto market.
The response strongly urges the SEC to offer clear and straightforward guidance rather than continue its “regulation by enforcement” approach.
Negative Market Impact of SEC Enforcement Actions
Ripple also highlights the negative market impact of SEC enforcement actions. It points to the 2020 lawsuit against Ripple, which led to a 70% drop in XRP’s price, wiping out $15 billion in market value.
Following the lawsuit, many cryptocurrency exchanges delisted XRP, restricting access for U.S. investors. Ripple notes that similar price declines occurred with Solana, Cardano, and Polygon after the SEC took action against major crypto exchanges.
Related: Ripple’s SEC Victory: Appeal Dropped, But SEC Silence Leaves “Officially Over?” Question Hanging
Use the Original Howey Test to Define Securities
Ripple’s letter implores the SEC to use the original Howey Test to define securities. This test requires an investment contract where profits are clearly expected to come from the efforts of a central party. Ripple argues that many digital assets, including XRP, do not fit this definition.
The letter also tackles the issue of staking and yield-generating crypto services. Ripple contends that returns generated by blockchain protocols should not be classified as securities, as these returns don’t involve a central issuer making specific investment promises.
Introduce Safe Harbors and Regulatory Sandboxes
Ripple supports Commissioner Peirce’s Safe Harbor proposal, which would give blockchain projects with a grace period to develop and become more decentralized before facing the full weight of securities laws.
The company also advocates for regulatory sandboxes—controlled environments where crypto firms can test innovations under limited oversight. Ripple points to countries like the UK, EU, and Singapore who have successfully implemented similar frameworks.
Related: Swift and Ripple in the News: Did a Premature Announcement Cause a “Hack” Claim?
Notably, Ripple plans to submit further responses to the SEC, particularly on custody-related issues. The company continues to push for legislative action, arguing that clear rules from Congress are the best path forward for the crypto industry.
Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.
