XRP: Ripple Clarity Act Submission Signals

What to Know:

• Key takeaway #1 — SEC feedback on Ripple suggests speculation alone shouldn’t trigger securities laws.
• Key takeaway #2 — A draft proposes classifying cryptocurrencies as “Digital Value Instruments” based on specific characteristics.
• Key takeaway #3 — Upcoming SEC-CFTC meeting and Senate discussions signal ongoing regulatory coordination and potential market structure changes.

A response posted to the US Securities and Exchange Commission’s Crypto Task Force page echoed concerns raised by Ripple that speculation alone should not automatically subject cryptocurrencies to federal securities laws, as lawmakers continue debating the CLARITY Act. The SEC is considering a new approach to crypto regulation, focusing on a broader set of factors rather than solely on speculation. This could significantly impact how digital assets like XRP are classified and regulated.

SEC’s Response to Ripple’s Concerns

The response, written by former SEC attorney Teresa Goody Guillen and published as public input on the SEC’s website, argued that holding a “passive economic interest,” such as buying a token in hopes its price rises, should not, by itself, trigger securities regulation. Guillen wrote that digital assets should instead be assessed using a broader set of factors applied on a sliding scale.

Guillen cited prior academic work, stating that she agrees with Ripple’s assertion that frameworks suggesting a passive economic interest alone could trigger securities laws mistakenly conflate speculation with investment rights. She added that her comments were not intended to set out a binding regulatory framework and did not reflect official SEC policy.

Proposed Crypto Asset Classification

Guillen also published a discussion draft for the “Digital Markets Restructure Act of 2026” that has not been approved by leadership at the SEC or the Commodity Futures Trading Commission. The draft proposes classifying certain cryptocurrencies as “Digital Value Instruments” when they do not fit neatly into existing categories such as securities or commodities. This new classification could provide a clearer regulatory framework for digital assets.

Cryptocurrencies would be deemed Digital Value Instruments if they exhibit at least three of five characteristics: free transferability, bearing a passive economic interest to holders, offering limited individual contractual rights to holders, holding a systemic dependency to the enterprise or protocol sponsor, or lacking the ability to discipline or replace the systems affecting the instrument’s value or operations. This classification aims to address the unique attributes of digital assets.

What Implications Does This Have for the XRP Ledger?

The XRP Ledger and its native cryptocurrency, XRP, could be significantly affected by these regulatory considerations. If the SEC adopts a more nuanced approach that considers factors beyond speculation, XRP might avoid being classified as a security. This would provide more regulatory clarity for Ripple and the broader XRP ecosystem, potentially boosting institutional sentiment and liquidity.

Moreover, the proposed classification of “Digital Value Instruments” could offer a pathway for XRP to be regulated under a framework that acknowledges its specific characteristics. This framework could address concerns about its systemic dependency on Ripple while recognizing its utility in facilitating cross-border payments. The derivatives data and funding rates for XRP could also be influenced by regulatory clarity.

Upcoming Regulatory Discussions

The publication of these submissions precedes a joint SEC-CFTC meeting scheduled to discuss regulatory coordination on digital assets. This meeting, initially set for Tuesday but delayed, will feature a fireside chat with SEC Chair Paul Atkins and CFTC Chair Mike Selig. The focus is on “harmonization” of digital asset regulations, which could bring more clarity to the market.

Additionally, the US Senate Agriculture Committee also delayed its markup for the crypto market structure bill due to severe weather conditions. These delays underscore the complexities and challenges involved in establishing comprehensive regulatory frameworks for digital assets, including considerations for volatility and liquidity.

How Will New Regulations Affect Institutional Sentiment?

New regulations and classifications for cryptocurrencies can significantly impact institutional sentiment and investment. If the SEC adopts a more flexible approach, as suggested in the response to Ripple, it could encourage greater institutional participation in the crypto market. Regulatory clarity reduces uncertainty and provides a more stable environment for long-term investment.

The proposed “Digital Value Instruments” classification could also attract institutional investors by offering a regulated framework tailored to the unique characteristics of digital assets. This could lead to increased ETF flows and greater liquidity in the market, benefiting assets like XRP and other cryptocurrencies. The derivatives data and funding rates will likely reflect these shifts in sentiment.

In conclusion, the SEC’s consideration of new regulatory approaches for cryptocurrencies, including a potential shift away from solely focusing on speculation, could have significant implications for assets like XRP and the broader digital asset market. The ongoing discussions and proposed classifications aim to provide greater clarity and encourage institutional participation.

Related: XRP Signals Negative Funding; Derivatives Data

Source: Original article