Ripple CTO Disagrees with SEC’s Definition of “Crypto Asset Security”
Ripple’s Chief Technology Officer, David “JoelKatz” Schwartz, has expressed concerns regarding the U.S. Securities and Exchange Commission’s (SEC) definition of “crypto asset security.” The SEC considers digital assets, virtual currencies, coins, and tokens as securities under federal securities laws.
Ripple CTO Challenges SEC Filing
In response to an SEC filing related to the Wahi lawsuit, Ripple CTO David “JoelKatz” Schwartz argued that the SEC’s definition of “crypto asset security” only aligns with tokenized stocks. He believes that the SEC may be spreading misinformation within the government.
Schwartz clarified that tokens transferred through distributed ledgers are not contracts, transactions, or schemes. Therefore, they cannot be classified as investment contracts or securities under U.S. law. He emphasized that for something to be considered a security, it must meet other criteria outlined in U.S. law.
Disagreement Over the Term “Asset”
Schwartz further criticized the term “asset,” stating that it is ambiguous. He provided an example of selling an apple, where the asset received is not just the apple itself but also includes rights such as the ability to sue if the apple is defective. In contrast, Gary Gensler, the Chair of the SEC, believes that almost everything in the crypto industry is a security, even well-established entities that are not considered securities by others.
Pro-XRP Lawyer Supports Ripple
Bill Morgan, a lawyer representing XRP’s interests, supported Ripple’s stance and accused the SEC of spreading propaganda. He argued that terms like “crypto asset securities” and “crypto securities markets” used by the SEC are not found in U.S. securities legislation. Furthermore, he stated that the SEC cannot define these terms as they believe no rulemaking is necessary for cryptocurrencies.
“The SEC produced a definition of crypto asset securities instead of just using the term. The market would have some criteria to decide whether a crypto is a crypto asset security. But the SEC cannot even tell Congress whether Ethereum is a security. It doesn’t even have a definition for its own terms.”
SEC Denies Coinbase’s Request for Crypto Rulemaking
Meanwhile, Coinbase has been denied its request for crypto rulemaking by the SEC. The SEC argued that existing securities laws already apply to cryptocurrencies and that it addresses the crypto securities markets through rulemaking. The SEC also emphasized the importance of maintaining its own discretion in setting rulemaking priorities.
Hot Take: Ripple CTO Questions SEC’s Definition of “Crypto Asset Security”
Ripple CTO David “JoelKatz” Schwartz has raised concerns about the SEC’s definition of “crypto asset security,” arguing that it may only apply to tokenized stocks and that the SEC could be spreading misinformation. He believes that tokens transferred through distributed ledgers do not meet the criteria to be considered investment contracts or securities under U.S. law. Additionally, he criticized the ambiguity of the term “asset.” Pro-XRP lawyer Bill Morgan supported Ripple’s stance and accused the SEC of spreading propaganda. The SEC denied Coinbase’s request for crypto rulemaking, asserting that existing securities laws already apply to cryptocurrencies.
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