XRP Documents Reveal SEC Uncertainty Over Regulations

XRP has once again taken center stage in the ongoing regulatory drama involving U.S. authorities and major crypto firms. Recently released documents, obtained by Coinbase through a Freedom of Information Act (FOIA) request, expose internal Securities and Exchange Commission (SEC) communications that reveal regulatory indecision on digital assets like XRP and Ethereum.

In June 2023, the New York Attorney General’s Office sought the SEC’s formal stance on Ethereum’s classification. The state aimed to reinforce its legal case against the crypto exchange KuCoin, proposing that Ethereum should be designated a security. The request, made by the Chief of the Attorney General’s Investor Protection Bureau, Shamiso Maswoswe, asked the SEC to submit an amicus brief advocating this view. She noted that although the SEC seldom intervenes at the trial level, doing so would serve the interests of investor protection.

This exchange was just one of several disclosed internal communications between regulatory agencies and federal bodies, shedding light on how the U.S. government has navigated digital asset oversight. Despite public enforcement actions targeting crypto companies, these documents illustrate behind-the-scenes uncertainty and conflicting strategies.

Coinbase’s release of these emails underscores the inconsistencies in the SEC’s approach. While publicly aggressive in its regulatory actions, the agency often refrained from declaring firm positions in private discussions. This cautious posture becomes even more evident in previous correspondence between the SEC and Ripple Labs dating back to 2021, furthering the conversation around XRP and securities law.

In a letter dated December 9, 2021, the SEC inquired about Ripple’s forthcoming Liquidity Hub product. The agency expressed concerns over potential violations, suspecting that Ripple could facilitate sales of unregistered securities, including XRP. They questioned whether Ripple had taken measures to ensure compliance with federal securities regulations.

Ripple’s answer came swiftly in a December 23 reply, firmly pushing back against the SEC’s implications. The company emphasized that it was under no legal duty to consult the Commission before developing or launching its products, reiterating its belief that XRP was not a security and that it had complied with all legal obligations.

These newly surfaced documents add more fuel to the fire surrounding Ripple’s long-standing dispute with the SEC. The contradiction between the SEC’s external actions and internal hesitation reveals a fragmented regulatory philosophy that has left many crypto firms uncertain about their legal standing. For an industry looking for clear guidance, the lack of definitive positions on whether assets like XRP are securities continues to be a significant obstacle.

Moreover, the SEC’s strategy of using enforcement rather than transparent rulemaking adds to the ambiguity. Crypto firms have expressed frustration with this approach, as it leaves them vulnerable to legal action without prior legislation or clear definitions. The ongoing Ripple case serves as a critical test case not just for XRP, but for how all digital assets will be treated under U.S. securities law in the future.

As the friction between regulators and the crypto industry persists, these SEC records provide rare insight into the evolving challenges of regulating digital currencies. With Ripple continuing to defend its stance and more documents likely to come, XRP remains a central figure in shaping the future regulatory landscape for crypto.

Related: Expert Advice: Sell XRP If You’re Confused