Ripple Proposes Network Maturity Standard to Regulate Crypto

• Ripple advocates maturity standard for crypto assets
• XRP may avoid security classification
• Decentralization is a flawed concept, Ripple tells SEC

Ripple has submitted a formal request to the United States Securities and Exchange Commission (SEC) proposing objective criteria to determine when a crypto asset ceases to be considered a security. The initiative aims to guide the regulatory treatment of tokens traded on the secondary market, arguing that these assets do not maintain the contractual ties required by current legislation.

In a May 27 filing with the SEC’s Crypto and Cyber ​​Assets Unit, the company referenced a 2023 court ruling that found that XRP should not be classified as a security in secondary trading. Ripple argues that regulatory oversight should focus only when there are outstanding obligations on the part of the issuer or enforceable rights still pending.

To replace the current criterion, based on the concept of decentralization, considered “vague and inconsistent” by the company, Ripple proposed the use of “network maturity”. The definition would involve three specific criteria: robust market capitalization, continuous operation on a public network without permission and absence of unilateral control over key functions.

Under the proposal, tokens that meet these criteria already operate transparently in highly liquid markets and would not require new regulatory obligations such as registration or additional disclosure.

The company noted: “We understand the SEC’s concern that the current state of the law could allow bad actors to evade liability […] However, if there is a gap in the law, it is up to Congress — not the SEC — to fill it.”

Furthermore, Ripple reinforced that many of these assets are used as the basis for regulated products such as ETFs and futures contracts, arguing that imposing obligations under securities law would be counterproductive for assets already integrated into the financial market.

With this approach, Ripple seeks regulatory clarity and a more predictable environment for cryptocurrency trading and development in the United States.