Ripple’s Chief Legal Officer Stuart Alderoty has called on the U.S. Securities and Exchange Commission (SEC) to take a more cautious approach to cryptocurrency regulation.
Alderoty highlighted the need for regulatory clarity, outlining six key principles that should guide the legal framework in the years to come:
SEC Jurisdiction: The SEC's jurisdiction covers only securities transactions, not all asset sales.
Asset and Security Distinction: The sale of a gold bar tied to a gold mining contract may constitute a security transaction, but the sale of the same bar without post-sale rights is merely an asset sale and does not fall within the jurisdiction of the SEC.
Post-Sale Obligations: Transactions that do not involve post-sale obligations to the buyer should not be treated as securities.
Clarifying Disclosures: The SEC cannot arbitrarily expand its reach based on subjective views about who should provide more disclosure.
Tokens Are Not Securities: A token may be included in a securities transaction, but should never be considered a security.
Token Conversion Is Misleading: The notion that a token can be converted from a security to a non-security lacks legal basis.
Alderoty said the SEC should respect legal definitions and avoid unnecessary overreach, adding that he expects these principles to become standard practice by 2025.
Cryptocurrency lawyer MetaLawMan said he largely agreed with Alderoty’s principles, but offered a brief clarification: “A token is almost never a security. However, if a token provides benefits in a project, such as distributions, dividends, or equity, then it is rarely considered a security.”