The U.S. Securities and Exchange Commission (SEC) is reportedly considering classifying XRP as a commodity rather than a security. This discussion has emerged amid ongoing settlement negotiations between the agency and Ripple Labs, potentially indicating a significant shift in the regulatory stance of the SEC.
SEC Weighs XRP’s Commodity Status
According to insiders cited by senior Fox Business correspondent Charles Gasparino, the SEC is re-evaluating XRP’s utility and market behavior to determine if it aligns more closely with commodities like Ethereum (ETH).
“One issue that is being weighed by the commission is whether $XRP continues to trade and have a utility that makes it more a commodity and not a security,” the reporter stated.
Gasparino further noted the significance of comparing XRP’s situation with that of ETH, which was issued through an initial coin offering (ICO) but has evolved into a commodity, thus avoiding SEC action. The commission seeks to establish whether XRP has similarly evolved, enabling it to be classified as a commodity.
“The SEC believes ETH trades as a pure commodity. They are trying to determine if the commission can make that case with $XRP,” claimed Gasparino.
This discussion is part of broader settlement talks between Ripple and the SEC. Previously, the SEC secured a partial victory against Ripple, imposing a $125 million fine along with a permanent injunction that restricts institutional XRP sales.
However, Ripple’s legal team is advocating for more favorable settlement terms, contending that recent regulatory shifts justify reassessing the penalties imposed on the company. Their argument centers around whether the SEC’s new leadership intends to reset enforcement policies for crypto companies, suggesting that Ripple should not face penalties for actions taken in a rapidly evolving regulatory landscape. Earlier reports indicated that these efforts to reevaluate settlement terms were a significant factor contributing to the delay in resolving the case.
A Proposal for XRP’s Future
In addition to this dialogue, a proposal by Maximilian Staudinger to classify XRP as a strategic financial asset has added yet another layer to the ongoing debate. His plan, submitted to the newly formed SEC cryptocurrency task force, suggests that integrating XRP into the U.S. financial system could unlock an impressive $1.5 trillion in liquidity and save approximately $7.5 billion annually in transaction costs.
Staudinger proposes the expedited implementation of XRP for various government transactions, bank liquidity needs, and even as a component of a potential national Bitcoin reserve.
In the midst of these developments, XRP’s market performance has been mixed. Although it experienced a 2.6% increase in the last 24 hours, a 13% decline in the past week reflects a significant underperformance compared to the broader crypto market, which has seen a downturn of 6.40%.
Despite these fluctuations, XRP’s fully diluted valuation has surpassed that of Ethereum, standing at $229.2 billion at the time of writing, compared to ETH’s value of $228.1 billion.
The implications of the SEC’s potential reclassification of XRP remain to be seen, but the shift in regulatory dialogue marks a pivotal moment for Ripple and the broader cryptocurrency market.
