“We are for this proposal. The SEC clearly has the authority to do it,” Alderoty wrote.
He also voiced concerns about the ‘case-by-case’ approach of ‘coin-by-coin’ enforcement that the regulator had used for so long. Ripple, therefore, says there is a need for a clear set of rules to provide legal clarity to the industry.
The SEC proposed regulation
In August, the U.S. regulator revealed its proposal to introduce two exemptions to the usual securities registration rules. The first exemption would be applicable to qualifying cryptocurrency projects to raise up to $5 million over a four-year period. Meanwhile, the second exemption would allow up to $75 million to be raised each year.
Also, the proposed regulation will introduce a conditional safe harbor for digital assets that have ceased to be investment contracts.
Key arguments from Ripple
One of the central arguments from Ripple in the 20-page comment letter is related to the difference between the cryptocurrency itself and the investment contract through which it is sold.
According to Alderoty, the proposed regulation follows the rule set by the Supreme Court’s historic Howey decision.
The proposed rules suggest that a cryptocurrency does not necessarily have to remain within the scope of securities regulations for life. It all depends on the sale of the cryptocurrency within the investment contract.
It depends on the specific promises made by the issuer. The obligations may no longer apply.
Another important topic that Ripple strongly criticizes is the idea of using the decentralization feature as a core factor in determining whether a cryptocurrency is a security.
