XRP Update: Ripple CEO to Testify in U.S. Senate on Crypto Regulations

The U.S. Senate Banking Committee has announced a hearing on July 9 to discuss a proposed bill that aims to bring clarity to regulatory definitions within the crypto market. Among the witnesses set to appear is Ripple CEO Brad Garlinghouse, along with other prominent figures in the industry. This hearing comes after the introduction of legislation by four senators with the goal of determining which digital assets fall under the classification of securities or commodities, a challenge that has long plagued the industry with regulatory uncertainty.

The focus of the hearing will be on the Market Structure legislation introduced by the senators, which seeks to establish clear guidelines for the classification of crypto tokens as either securities, regulated by the Securities and Exchange Commission (SEC), or commodities overseen by the Commodity Futures Trading Commission (CFTC). Apart from Garlinghouse, testimony will also be heard from representatives of the Blockchain Association, Chainalysis, and Paradigm.

Garlinghouse’s involvement in this hearing underscores Ripple’s significant role in the ongoing regulatory discussions. Ripple has been engaged with U.S. regulators since 2013, making efforts to clarify the status of XRP. Discussions between Ripple Chairman Chris Larsen and agencies like the Federal Reserve, SEC, and Treasury focused on early recognition of XRP’s blockchain technology, particularly the XRP Ledger.

Historical records reveal that in 2014, the U.S. Government Accountability Office identified XRP as a virtual currency. Subsequently, in 2015, Ripple reached a compliance agreement with the Financial Crimes Enforcement Network (FinCEN) following penalties related to previous sales. Despite an internal SEC evaluation in 2018 that did not recommend enforcement actions, the SEC filed a lawsuit against Ripple in December 2020, alleging that XRP sales over the years were unregistered securities transactions.

The context also includes the 2019 Financial Stability Oversight Council (FSOC) report, which categorized XRP as a virtual currency and was co-signed by leaders of both the SEC and CFTC. This report coincided with Coinbase’s decision to list XRP after evaluating it as not a security. Coinbase proceeded with the listing without objection from the SEC and actively promoted the use of XRP for cross-border settlements. Similarly, MoneyGram’s 2019 filings mentioned plans to use XRP in payment processing, with no regulatory pushback from the SEC, even after secondary market sales.

Despite being listed on over 200 exchanges worldwide and being classified as a non-security by various global regulators, the SEC’s lawsuit against Ripple continues. This legal action underscores the critical need for regulatory clarity, a key issue that the Market Structure legislation aims to address. Garlinghouse’s testimony at the hearing is expected to shed light on these regulatory discrepancies, potentially offering lawmakers valuable insights to help create more coherent guidelines for defining digital assets.