- The company supports Congress in developing guidelines that would prevent the SEC from regulating digital assets as securities.
- The firm reflects on SEC enforcement actions that caused XRP’s value to plummet 70% after the 2020 lawsuit.
- Ripple endorses both Safe Harbor proposals and regulatory sandboxes for creating innovative crypto industry structures that follow regulatory standards.
Ripple Labs presented a formal request to the U.S. Securities and Exchange Commission (SEC) for methodical regulatory guidelines in digital asset management. Ripple sent a letter to Commissioner Hester Peirce where the company expressed its criticism of the prior SEC leadership for generating ambiguity and requested official legal regulation.
Ripple maintains that the SEC exceeds its power by attempting to classify most digital assets as securities. The company maintains that cryptocurrencies that do not qualify as securities require Congress to formulate proper regulatory guidelines for the crypto market. Ripple argues that the marketplace needs precise regulatory instructions rather than the SEC’s current method of acting without proper direction.
Impact of SEC Enforcement Actions on the Market
SEC enforcement actions create detrimental market effects which the company describes in detail. A 70% price decrease occurred to XRP following the 2020 lawsuit the company faced while investors lost $15 billion in market value during this period. The legal dispute sparked XRP delisting by multiple cryptocurrency exchange platforms that restricted American investors from buying or selling XRP. Three cryptocurrencies including Solana along with Cardano and Polygon saw their prices decrease after the SEC enforce actions against the major exchanges.
Ripple demands that the SEC use the original version of the Howey Test to define securities by requiring investors to expect profits that originate from the active participation of a central party. The firm maintains that XRP along with other digital assets should not qualify as securities according to the definition. The Ripple blockchain platform emphasizes that yield-generating crypto functions should not fit under SEC security classifications because these protocols have no central authority to make specific investment pledges to users.
Proposal for Safe Harbors and Regulatory Sandboxes
The company backs Commissioner Peirce’s Safe Harbor proposal that provides blockchain projects an initial construction period to become decentralized and independent from securities regulations.
As part of its position, Ripple endorses networks called regulatory sandboxes that enable cryptocurrency companies to develop their products while being supervised to a limited extent. The company emphasizes the successful executions of comparable frameworks from the UK and Singapore.
Ripple will present additional regulatory responses to the SEC regarding the matters of cryptocurrency custody. The company remains committed to pursuing legislative solutions because it sees congressional boundaries as the most effective framework for cryptographic innovation.
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