Ripple has called on the US Securities and Exchange Commission (SEC) to determine clearer standards to determine when a digital active is no longer eligible as part of an investment contract.
The company has submitted a detailed person letter According to the Crypto assets and cyber unit of the SEC on 27 May, there is a question of a question asked by Commissioner Hester Peirce in her speech “New paradigm”.
Understand crypto effects
In the letter, Ripple argued that most fungic digital assets that are traded on secondary markets should not be considered as effects. It mentioned legal investigation that suggests that these tokens lack the continuous obligations between issuers and buyers who usually define investment contracts.
The company also referred to the 2023 ruling in its case, which concluded that XRP was not safety in the secondary market. However, some early institutional sales were considered investment contracts.
To guide future regulations, Ripple proposed a practical framework. A token may only remain under the securities law if the issuer does not yet have to meet material promises or if token holders still have enforceable rights against the issue.
These material promises can include obligations to deliver a functioning network or to offer financial returns. Ripple argued that legal supervision on the basis of securities legislation becomes unnecessary without these elements.
It noticed:
“We understand the concern of the SEC that the current law of the Bad Actors Act can enable that good responsibility, or that well-intended actors can raise money in transactions that resemble traditional securities offers without in accordance with supervision. If there is a gap in the law, it is the congress not to fill it.”
Decentralization versus adulthood
Ripple also insisted on the SEC to leave the use of “decentralization” as an important regulating benchmark. It described the term as vague and inconsistent about legal, technical and policy discussions.
Instead, the company suggested using “network maturity” as a more measurable and objective standard.
Under the proposal of Ripple, a digital active securities classification can avoid if it meets three criteria: a substantial market threshold for market capitalization, operation on a public and permission -free network for a fixed period and the absence of an individual or group of a unilateral control over the nuclear functions of the network.
Ripple claimed that assets that meet these criteria are already integrated into the broader financial system. According to the company, many of these assets act in deep, liquid markets and form the basis for regulated investment products such as ETFs and futures.
The company concluded:
“It would be inappropriate to impose new obligations on the securities legislation – such as registration or disclosure – on tokens and networks that have operated, openly, transparent and permissionless for a considerable time and traded in broad liquid markets.”