Ripple Sends Bold Letter to SEC: When Does a Crypto Stop Being a Security?

Ripple Sends Bold Letter to SEC: Is It Time for a New Crypto Rulebook?

Following up on Commissioner Hester Peirce’s “New Paradigm” speech, Ripple sent a letter to the SEC Crypto Task Force. How a digital asset that was first offered as a component of an investment contract can cease to be a security and become independent of that contract is the main topic of the letter.

Ripple Urges Clarity: “Crypto Assets Aren’t Securities by Default”

When it comes to secondary market trading, Ripple backs the idea that the majority of fungible cryptocurrency assets are not securities because they don’t have the distinguishing legal connection of securities. Citing Judge Torres’ 2023 decision in the SEC v. Ripple case, the San Francisco-based business ruled that XRP is not a security in and of itself. Some institutional sales were categorized as securities, though.

The SEC‘s previous reliance on ambiguous rules is criticized, and it needs precise guidance grounded on the law as it is. Moreover, Ripple has called on Congress to fill in the remaining legal loopholes.

Is Your Token Still a Security? Ripple’s Maturity Test Says Maybe Not

Unless a significant promise made during the initial investment contract is still unmet or the current holder has actionable rights against the issuer based on that promise, a digital asset should be regarded as distinct from an investment contract. According to Ripple, generic remarks or the delivery of tokens alone shouldn’t be considered such guarantees.

A maturity test has also been suggested by Ripple as a more precise criterion for identifying when an asset is removed from an investment contract. Criteria, including a market value criterion and the amount of time a network is open and permissionless, are part of the test. Furthermore, no entity should be able to unilaterally influence the essential operations of the network.

For more up-to-date crypto news, you can follow Crypto Data Space.