The U.S. Securities and Exchange Commission (SEC) is actively evaluating whether XRP should be classified as a commodity rather than a security. According to Charles Gasparino, senior correspondent at Fox Business, this issue has emerged as a key factor in the ongoing settlement discussions between the SEC and Ripple.
Gasparino, based on a prior report from Eleanor Terrett, revealed that the SEC is reassessing XRP’s utility and trade characteristics. The commission is comparing XRP to Ethereum, particularly in light of how the SEC previously determined that Ether had “morphed” into a commodity.
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Ethereum Comparison: The SEC’s Key Argument
Gasparino explained how XRP and Ether served similar purposes in funding the initial development projects of their foundations. While Ripple faced legal action, the SEC did not issue any legal challenges to Ethereum.
The SEC is currently examining XRP’s characteristics to determine if its buying and utilization functions better match commodity classification.
The SEC formed its stance on Ethereum through a significant speech delivered by William Hinman during his time as SEC Director in 2018. During his address, Hinman mentioned that Ether did not represent security because of its decentralized nature and the developing market framework established its status as such.
Ethereum initiated its token sale process similarly to XRP, but the SEC later designated Ether as a commodity that now falls under the Commodity Futures Trading Commission (CFTC) monitoring.
The SEC needs to determine whether they consider XRP to share comparable qualities with other assets. According to public reports, the commission finds Ethereum trades only as commodities. Authorities must decide if the XRP case can match its counterparts’ status.
Ripple’s Response and the Debate Over XRP’s Utility
David Schwartz provided his view as Ripple’s Chief Technology Officer to explain the essential difference between XRP and Ether. According to Schwartz, XRP became available to buyers after its operational blockchain ledger launched, but Ether had a private sale period before its blockchain became operational.
XRP followed a different protocol during its release than Ethereum did with its initial coin offering (ICO). The decisions made by the SEC regarding these cases have triggered questions about the inconsistent interpretation of regulations.
Community members supporting XRP claim that the SEC has picked XRP as an unfair target despite giving Ethereum less stringent rules.
Potential Implications for the Crypto Market
If the SEC ultimately classifies XRP as a commodity, the case could set a precedent for other cryptocurrencies facing regulatory scrutiny. Through such classification, XRP could move to CFTC oversight while leaving behind certain regulatory burdens that Ripple currently faces.
Ripple could encounter additional legal barriers and financial complications because the Securities and Exchange Commission maintains its position that XRP operates as a security.
A regulatory decision against Ripple’s XRP could establish new criteria for classifying digital assets, transforming U.S. trading standards and regulatory procedures for these assets.
Ripple and the Securities and Exchange Commission are engaged in settlement talks, and investors and industry stakeholders are closely tracking this process. XRP’s regulatory classification will hold critical importance for cryptocurrencies as the regulatory bodies of digital assets move toward establishing new standards.
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