Ripple Criticizes Crypto Bill, Citing SEC Overreach

Ripple's Regulatory Concerns

Ripple has voiced strong concerns about a draft bill aimed at establishing a clear crypto market structure in the United States. The company argues that the current proposal risks granting the Securities and Exchange Commission (SEC) unchecked authority, potentially stifling innovation and creating ongoing regulatory ambiguity within the digital asset space.

Key Objections

• SEC Overreach: Ripple believes the bill's definition of 'ancillary asset' could lead to the SEC exerting indefinite jurisdiction over tokens initially offered in connection with an investment contract.
• Unfair Treatment of Established Tokens: The company contends that well-established tokens like ETH, SOL, and XRP—operating on open, decentralized networks—should not be subject to perpetual SEC oversight if their current transactions don't exhibit characteristics of securities.
• Need for Objective Criteria: Ripple advocates for Congress to define objective criteria for applying the Howey test to digital assets, rather than leaving it to regulators. They caution against vague codification of Howey, which they say would increase uncertainty.

In a letter to Senate Banking Committee Chairman Tim Scott, Ripple Chief Legal Officer Stuart Alderoty emphasized the need for clearer boundaries, particularly concerning SEC jurisdiction and the classification of tokens.

“The current definition of ‘ancillary asset’ risks 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 wrote.

Ripple's Recommendations

To address these issues, Ripple suggests several key changes:

• Tokens traded freely on permissionless networks for five or more years should be presumptively excluded from securities regulation.
• Federal preemption of state laws should be implemented to ensure consistent regulatory application across the country.

The need for clear regulatory frameworks in the crypto space is paramount, and Ripple's recent legal battles underscore the need for clear, concise regulation. For projects navigating the complexities of token launches and regulatory compliance, platforms like Codeum offer security audits, KYC/AML solutions, and expert consulting to ensure adherence to best practices. Such services are invaluable in mitigating risks and fostering trust in the blockchain ecosystem.