Ripple responds to the Senate Banking Committee’s RFI on Crypto Market Structure Bill, urging clearer SEC-CFTC roles and less regulatory overreach.
Several crypto stakeholders have responded to the Senate Banking Committee’s Request For Information (RFI), with Ripple being the most recent to do so. Stuart Alderoty, the firm’s Chief Legal Officer (CLO), stated that they were well-positioned to make a meaningful contribution to the bill due to their extensive experience with regulators, such as the SEC.
Response to Senate Information Request by Ripple
Alderoty disclosed the crypto company’s response to the Senate Banking Committee’s request for information (RFI) in an X post. Additionally, he expressed gratitude to the Committee for the chance to respond to the RFI. The CLO expressed his firm’s enthusiasm for the opportunity to provide their distinctive viewpoint, which reflects their ten years of experience collaborating with regulators worldwide and the valuable lessons they have acquired from their SEC lawsuit.
The Senate Banking Committee released the RFI after the publication of the draft Crypto Market Structure Bill, as previously reported. The Request For Information solicited inquiries regarding investor protection, regulatory clarity and tailoring, trading venues, market infrastructure, custody, illicit finance, banking, and innovation.
Ripple’s response was primarily directed at inquiries regarding regulatory clarity. The initial inquiry was whether the measure effectively balanced the allocation of jurisdiction over digital assets between the SEC and CFTC.
The crypto firm observed that the draft creates more ambiguity than clarity for the industry in its endeavor to differentiate the authority of the SEC and CFTC over digital assets. They requested further revisions to accomplish a balanced oversight framework and refine jurisdictional boundaries.
Regarding the Applicability of the Ancillary Assets Concept to Cryptocurrency
Ripple maintained that the Crypto Market Structure Bill should not be predicated on ancillary assets, which could result in regulatory excess in certain circumstances. The firm observed that there is no guarantee that a different SEC leadership will consistently and principledly implement this concept.
The RFI response acknowledged that the concept of ancillary assets could subject key tokens operating on open and permissionless networks, such as ETH, SOL, and XRP, to perpetual SEC oversight. This could occur regardless of whether the transactions lack the characteristics of a securities offering.
Consequently, Ripple suggested that the draft bill should be consistent with the CLARITY Act’s classification of digital assets to prevent regulatory fragmentation and market uncertainty. They also requested that the proposed legislation consider the decentralized character of mature networks, in which no individual or group controls.
The firm responded to the inquiry of whether existing tokens should be included in a new token classification framework by stating that tokens that have existed for five years or more on permissionless, open networks should be presumptively excluded from securities regulation.
Preventing the Implementation of Additional Regulations Through Enforcement Strategies in the Future
Ripple is very apprehensive about the bill’s creation of open-ended provisions that would enable the Commission to modify the rules in its favor, possibly due to its XRP lawsuit against the SEC. For example, the firm advocated for Congress to codify the Howey Test to prevent the SEC from misusing or manipulating it, if it intends to apply it to digital assets.
It is probable that Alderoty and his organization harbor reservations regarding future administrations, rather than this one. Paul Atkins, the SEC Chair, was even commended by the Ripple CLO for the regulatory shift during his tenure.
In the meantime, the crypto firm expressed its belief that preemption is particularly important in market structure, stablecoin issuance, custody standards, and token classification when determining whether federal legislation should preempt specific state laws.
