Ripple Urges SEC to Finalize Crypto Rules, Citing Need for Clarity and Innovation
Ripple has formally urged the U.S. Securities and Exchange Commission (SEC) to finalize its proposed rules for crypto assets, arguing that clear regulations are essential for investor protection and to retain innovation within the United States. The company submitted a comment letter on October 20th in support of the SEC’s proposed “Regulation Crypto Assets.”
Costly Legal Battles Highlight Need for Clear Framework
Stuart Alderoty, Ripple’s Chief Legal Officer, stated that the company has spent over $150 million in its pursuit of legal clarity, emphasizing that “No company should have to do that to learn what the law requires.” He believes that a well-defined regulatory framework would enable companies to understand their legal obligations without enduring protracted and expensive court battles. Alderoty contends that such clarity would not only attract investment and safeguard investors but also foster the continued growth of the cryptocurrency industry in the U.S.
Proposal Details and Industry Concerns
The SEC’s proposed regulation, introduced in August, includes provisions for fundraising exemptions for qualifying digital asset investment contracts. One exemption would permit eligible startups to raise up to $5 million over a four-year period. A second, more substantial exemption would allow for offerings of up to $75 million within 12 months, contingent upon meeting stringent disclosure and financial reporting requirements.
The proposal also features a safe harbor mechanism designed to help issuers determine when they have fulfilled their initial promises, thereby delinking a token from an investment contract. While Ripple supports this aspect, the company is advocating for a more robust and predictable process for exchanges, brokers, and other market participants.
Alderoty stressed that the industry requires comprehensive rules rather than a piecemeal, case-by-case enforcement approach. He asserted that years of such enforcement have driven crypto innovation offshore. Ripple advocates for regulations that align with existing laws and clearly delineate when a digital asset should be subject to securities laws. He further clarified that a token’s mere sale through an investment contract does not automatically classify it as a security. According to Alderoty, the focus, under the Howey test, should be on the issuer’s promises and their fulfillment, rather than using decentralization as the primary determinant.
Broader Industry Support for Regulatory Clarity
Ripple is not alone in its call for clearer regulations. A coalition of industry players, including Chainlink, Hedera, Stellar, Aptos, Avalanche, and Cardano, has also submitted a joint letter. Their submission calls for clearer rules, including the explicit recognition of digital commodities within the regulatory text.
The SEC is currently reviewing the feedback received from the industry. While the primary comment period concluded on October 20th, the regulator is expected to continue accepting comments as it deliberates potential changes before a final commission vote.
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