The SEC is considering changing XRP’s status from a security to a commodity, just like Ethereum.
If this motion passes, XRP will have less on its plate to deal with government restrictions in its favor and will take a better position than the market.
In the meantime, Vermont has withdrawn from its lawsuit against Coinbase, blaming the SEC for shifting its position on cryptocurrency regulation. Such developments have a substantive impact on laws categorizing and regulating cryptocurrencies.
SEC re-evaluates XRP’s status amid changing regulations in cryptocurrency
The SEC v. Ripple case makes everyone anxious for a conclusion, as the commission accused XRP of being an unlicensed security and tried to suspend its trading activity.
However, recent reports suggest that the two parties are set to reach a settlement, with Ripple looking to negotiate adjustments that could have massive implications for the crypto space.
Fox Business Network (FBN) Senior Correspondent Charles Gasparino reported that the SEC is looking into whether XRP will continue to trade as a commodity, as opposed to a security, much like Ethereum made its transition from an ICO to a commodity. He noted that the only difference is that Ripple was sued, but Ethereum wasn’t because ETH had since transformed into a commodity.
If the motion to change XRP from a security to a commodity gets approved, the effects will spill over into the country’s cryptocurrency regulations. SEC commissioner Hester Peirce hinted that some digital assets, like meme coins, won’t be treated as securities anymore.
The commission is also interested in partnering with the US’s top commodities regulator, the Commodity Futures Trading Commission (CFTC). If the SEC settles its issues with Ripple, XRP’s market value may reach an all-time high.
Ripple wants to be the next Ethereum
Ripple wants XRP to be like ETH so that the SEC classifies it as a commodity for transactions and not an investment contract.
The SEC could also consider past legal cases to support its decision, including a 2022 lawsuit in which Vermont and other US states sued Coinbase for breaking security regulations with its staking services.
However, the company’s chief legal officer recently disclosed that Vermont dropped all charges, claiming the SEC’s new approach to crypto regulations made their old argument irrelevant.
Vermont’s regulators explained that the SEC has come up with a new task force to review the crypto regulations for the better. And since one state already admitted that its past arguments don’t hold up anymore, the SEC may decide it was too harsh on Ripple and take the next step to reclassify XRP.
Ripple battles SEC over status as lawsuit nears conclusion
In 2020, the SEC filed a lawsuit against Ripple. The SEC claimed that Ripple illegally sold XRP as an unregistered security. The news came as a big shock to many because XRP was the third most popular crypto in late 2017. Ripple, however, defended itself by arguing that XRP isn’t a security but a digital currency.
XRP’s proposition was valid as the whole supply of 100 billion tokens was mined at once, making cross-border payment transactions faster and more efficient. Ripple owns more XRP in escrow and only releases it in measured amounts to keep the market stable, but the SEC didn’t like that.
The Howey test classifies an asset as a security under US law if people invest their money in a shared project and expect to profit from someone else’s efforts.
The SEC argued Ripple did just that and added that the company had more control over the supply of this altcoin and actively promoted its value, meaning it should have registered XRP as a security. To summarize, the lawsuit said Ripple sold XRP as an unregistered security and raised some $1.3 billion, which violated federal securities law.
Both sides are now in settlement negotiations, which brings the case closer to resolution. However, there is no official word on whether they plan to end the case.
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