“Some of the rules regarding crypto assets are well settled. The test to determine whether a crypto asset is a security is straightforward.”
The endless debate over regulatory clarity within the digital asset space has reached Senator Elizabeth Warren, who has requested information about the regulator’s current authority over the industry and what is required of Congress to fill existing gaps in regulation.
The deadline for response was July 28, the day Representative Don Baer introduced legislation to protect consumers and promote innovation in the space: the Digital Asset Market Structure and Investor Protection Act.
Senator Warren requested that the CFTC be implicitly removed from the equation, and Gensler’s response from the Securities and Exchange Commission, now announced, makes clear that this is the agency’s expectation.
“A typical trading platform contains more than 50 tokens. In fact, many own over 100 tokens. While the legal status of each token depends on its facts and circumstances, the possibility is very remote that with 50 or 100 tokens, the Any particular platform does not contain any securities,” SEC President Gary Gensler said in the letter.
The Securities and Exchange Commission is also arguing in favor of the “Howie test” to ascertain the legal status of any given digital asset. Whether it is safe or not. “Some rules regarding crypto assets are well settled. The test of whether a crypto asset is a security is straightforward. The Securities and Exchange Commission has taken and will continue to take our powers as far as they go.”
A number of academics, including at Rutgers School of Law and the American Enterprise Institute, have said otherwise, suggesting a different approach to digital assets.
The SEC’s lawsuit against Ripple is probably the most serious threat to the validity of Howie’s test. The FSA recently said this when the court warned that a Ripple victory in the fair notice defense would be considered invalid.
This is also the reason why many legal experts close to the legal battle over the nature of XRP have argued that Ripple’s victory in a summary judgment on this defense “could save the industry from the SEC.”
SEC vs. Ripple: XRP Not Subject to SEC Under Pending Law, Lawyer Thien-Vu Hogan says
The dominant tone among regulators appears to be becoming more aggressive as the Securities and Exchange Commission (SEC) looks to claim the digital asset space for itself. Earlier this month, we saw some exchanges between the Commodity Futures Trading Commission (CFTC) and SEC commissioners to defend their authority over the asset class.
In the meantime, the period of finding out the facts is coming to an end, and there is still much to be done as both sides withhold valuable documents from the other side.
The SEC wants to force Ripple to hand over terabytes of Slack messages that could be crucial in the case of the agency where XRP is being marketed as collateral.
On the other hand, Ripple has become frustrated with the plaintiff’s use of the franchise principle to keep most documents unavailable to defendants. The court will hear the views of the parties to decide on the matter.
Judge Sarah Nitburn asked the defendants to write a 15-page “Beast Brief,” which appeared to include portions of the transcript of William Hinman’s testimony.