Ripple Urges SEC to Clarify Crypto Token Rules with ‘Network Maturity’ Proposal
- Ripple’s CLO calls for clear SEC guidance on crypto token status.
- Proposes a ‘network maturity’ test to identify non-security assets.
- Ripple urges SEC collaboration to ensure innovation isn’t stifled.
Stuart Alderoty, Ripple’s Chief Legal Officer, formally requested the SEC for a clear-cut mention regarding the classification of cryptocurrencies particularly which are traded on secondary markets. In Alderoty’s opinion, not having rules in place stifles innovation and places U.S.-based blockchain companies are at a disadvantage in the worldwide market.
The letter further speaks about the need for the SEC to adopt a pragmatic approach in differentiating genuine securities from decentralized crypto tokens. Reaffirming its long-held stance, Ripple states that XRP and tokens similar to it should, as a matter of law, not be held to be investment contracts when traded scarred from the issuers.
Introducing the ‘Network Maturity’ Test
Alderoty proposed a new framework, which he termed the “Network Maturity” test, a structured method for determining whether a crypto token has evolved beyond the characteristics of a security. This test assesses decentralization, utility, market participation, and the presence or absence of ongoing obligations by the original issuer.
If a token is used for payments or other decentralized applications without continuous control or profit assurances by its creators, Alderoty suggests it should not fall under the SEC’s jurisdiction as a security.
This test could help regulators better differentiate between early-stage projects, which might resemble investment contracts, and mature networks that function like commodities or currencies.
This call for clarity builds upon Judge Analisa Torres’ landmark 2023 ruling in the SEC vs. Ripple case. In that decision, the court held that XRP sales on public exchanges did not meet the definition of securities transactions. Alderoty believes the ruling set an important precedent and urges the SEC to internalize its logic into future policymaking.
By using the court’s judgment as a springboard, Ripple seeks to prod the SEC into crafting a clear policy built upon technological realities and giving some leeway to responsible crypto innovation.
Ripple Advocates Policy Dialogue and Engagement
Alderoty’s letter is not just a critique but also a call for constructive engagement. He suggested that the SEC work collaboratively with crypto stakeholders, legal experts, and technologists to develop new rules that meet the demands of a decentralized financial future.
He also highlighted that other jurisdictions such as the UK, EU, and Japan have made significant strides in building frameworks that encourage innovation while protecting consumers, and the U.S. must not lag.
Ripple’s approach seeking more nuanced regulation has gained traction among other crypto firms and policy advocates who agree that without clarity, U.S. companies face enforcement instead of guidance in situations that will drive innovation offshore.
As the crypto industry waits for a response, Alderoty’s suggestions could spark meaningful dialogue and potentially shape the future of U.S. crypto regulation.
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Ripple Urges SEC to Clarify Crypto Token Rules with ‘Network Maturity’ Proposal
- Ripple’s CLO calls for clear SEC guidance on crypto token status.
- Proposes a ‘network maturity’ test to identify non-security assets.
- Ripple urges SEC collaboration to ensure innovation isn’t stifled.
Stuart Alderoty, Ripple’s Chief Legal Officer, formally requested the SEC for a clear-cut mention regarding the classification of cryptocurrencies particularly which are traded on secondary markets. In Alderoty’s opinion, not having rules in place stifles innovation and places U.S.-based blockchain companies are at a disadvantage in the worldwide market.
The letter further speaks about the need for the SEC to adopt a pragmatic approach in differentiating genuine securities from decentralized crypto tokens. Reaffirming its long-held stance, Ripple states that XRP and tokens similar to it should, as a matter of law, not be held to be investment contracts when traded scarred from the issuers.
Introducing the ‘Network Maturity’ Test
Alderoty proposed a new framework, which he termed the “Network Maturity” test, a structured method for determining whether a crypto token has evolved beyond the characteristics of a security. This test assesses decentralization, utility, market participation, and the presence or absence of ongoing obligations by the original issuer.
If a token is used for payments or other decentralized applications without continuous control or profit assurances by its creators, Alderoty suggests it should not fall under the SEC’s jurisdiction as a security.
This test could help regulators better differentiate between early-stage projects, which might resemble investment contracts, and mature networks that function like commodities or currencies.
This call for clarity builds upon Judge Analisa Torres’ landmark 2023 ruling in the SEC vs. Ripple case. In that decision, the court held that XRP sales on public exchanges did not meet the definition of securities transactions. Alderoty believes the ruling set an important precedent and urges the SEC to internalize its logic into future policymaking.
By using the court’s judgment as a springboard, Ripple seeks to prod the SEC into crafting a clear policy built upon technological realities and giving some leeway to responsible crypto innovation.
Ripple Advocates Policy Dialogue and Engagement
Alderoty’s letter is not just a critique but also a call for constructive engagement. He suggested that the SEC work collaboratively with crypto stakeholders, legal experts, and technologists to develop new rules that meet the demands of a decentralized financial future.
He also highlighted that other jurisdictions such as the UK, EU, and Japan have made significant strides in building frameworks that encourage innovation while protecting consumers, and the U.S. must not lag.
Ripple’s approach seeking more nuanced regulation has gained traction among other crypto firms and policy advocates who agree that without clarity, U.S. companies face enforcement instead of guidance in situations that will drive innovation offshore.
As the crypto industry waits for a response, Alderoty’s suggestions could spark meaningful dialogue and potentially shape the future of U.S. crypto regulation.
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