- Ripple warns the Senate’s crypto bill could trap digital assets as securities indefinitely.
- The company is pushing for a 5-year “safe harbor” rule to let tokens become commodities.
- Clear federal crypto rules are seen as key to attracting major investment to the US.
Ripple Labs’ Chief Legal Officer, Stuart Alderoty, has submitted a formal response to the U.S. Senate Committee on Banking, Housing, and Urban Affairs regarding its proposed digital asset market structure.
This comes as the committee, led by Chairman Tim Scott, works to establish a clear regulatory framework, a key part of President Donald Trump’s agenda for digital assets.
The Senate committee specifically sought feedback from Ripple, leaning on the company’s hard-won legal expertise from its battle with the SEC. The committee’s main goal is to finally set clear rules, especially on the crucial difference between a security and a digital commodity.
Related: “Procrustean Bed” No More: SEC to Adopt Flexible Rules for Crypto, Says Atkins
Ripple’s Warning: A Flawed Definition
According to Alderoty, the draft legislation actually creates more legal confusion than it solves. He argues that it wrongly pushes most digital assets under the SEC’s permanent control, even when their later transactions have nothing to do with raising money for a project.
“The current definition of ‘ancillary assets’ risk significant regulatory overreach because it effectively presumes that any token once offered in connection with an investment contract places future transactions of that token by the originator under SEC jurisdiction indefinitely,” Alderoty noted.
Related: SEC Brings Out “Project Crypto” to Make U.S. the Blockchain Capital of the World
He also pointed out this entire approach flies in the face of Judge Analisa Torres’s landmark ruling in the Ripple vs. SEC case. In that decision, the judge found that everyday sales of XRP on crypto exchanges are not investment contracts and therefore don’t violate securities laws.
Here’s Ripple’s Proposed Solution
Instead of this flawed approach, Ripple urged the Senate to create a clear, defined process for a digital asset to officially transition from a security to a commodity.
As a concrete example, Alderoty suggested a “safe harbor” rule: if a crypto token has strong market liquidity and has been trading for at least five years on open networks, it should no longer be treated as a security.
On the issue of federal versus state laws, Alderoty also had a clear message: the committee must establish a single, consistent federal standard. He argued this is the only way to avoid a “regulatory fragmentation,” which would create a messy and confusing patchwork of 50 different state-level rules.
What’s the Expected Market Impact
The push for clear crypto regulations has sped up under the Trump administration, as it looks to make good on promises from the 2024 campaign. The entire crypto industry believes that getting these rules right is the key to attracting major investment and stopping innovative companies from moving overseas.
Ultimately, a well-defined crypto market structure could bring a massive boost to digital asset liquidity and trading volume. Since many crypto assets have a fixed or diminishing supply, analysts believe this kind of regulatory clarity is exactly what could lay the groundwork for the next major bull market.
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