Heath Tarbert, chairman of the U.S. Commodity Futures Trading Commission (CFTC) is the latest to weigh in on the conversation surrounding whether XRP should be classified as a security or a commodity. The U.S. financial regulatory chief did not, however, provide any clarity on the subject.
Ripple, majority owners of the XRP token maintain that the third-ranked crypto is not a security. Several critics argue otherwise pointing to the centralized control of the token supply. Ripple is even facing legal trouble on the account of whether the sale of XRP constitutes an unlicensed securities offering.
Confusion Reigns Over Whether XRP is a Security or a Commodity
In an interview with media outlet Cheddar chairman Tarbert remarked that it was unclear whether XRP is a security or a commodity. According to Tarbert:
“It’s unclear. Stay tuned I’d say. Part of the issue is that our jurisdiction we share with the SEC [Securities and Exchange Commission]. If it’s a security, it falls under their jurisdiction. If it’s a commodity, it falls under ours.”
The question of whether XRP is a security or a commodity continues to split opinions in the crypto industry. The two other major tokens — Bitcoin (BTC) and Ethereum (ETH), already have some level of clarity as to their status vis-à-vis security or commodity.
Brad Garlinghouse, CEO of Ripple as well as other company executives have come out to insist that XRP isn’t a security. For Ripple, XRP is not an investment contract and as such cannot be classified as a security.
Instead, the blockchain startup says XRP is a bridge currency that will improve global remittance by eliminating the need for correspondent banking.
However, critics say Ripple’s control of XRP makes the token a security. Some investors have even taken legal action against the company with the matter still in court.
Back in October 2019, major U.S. crypto companies like Kraken, Coinbase, and Bittrex came together to form the Crypto Rating Council (CRC) — a cryptocurrency self-regulatory body. In its maiden crypto ratings, the CRC, XRP obtained was deemed as most likely a security.
Confusion over XRP’s status as security or commodity has also hindered some U.S. platforms from listing the token on their trading catalog. Not until the end of Q1 2019, did Coinbase add XRP trading pairs to its retail trading platform.
US Crypto Laws Need Greater Clarity
For Tarbert, Federal regulators in the U.S. have to come together to streamline the country’s crypto regulatory environment. Several stakeholders in the U.S. crypto scene say the patchwork of State and Federal regulations aren’t helping the course of digital innovation in America.
As previously reported by Blockonomi, Tarbert declared back in mid-November 2019 that the U.S. should lead the world in crypto adoption. However, such lofty goals might remain unattainable without clear-cut crypto regulations.
Some lawmakers in the U.S. are already working towards simplifying the crypto regulatory matrix for the country. in December 2019, a group of Congressmen introduced the ‘Cryptocurrency Act of 2020’ which aims to delineate the duties and responsibilities of regulators like the CFTC and the Securities and Exchange Commission (SEC).
The Token Taxonomy Act is also another piece of legislation geared towards the U.S. crypto industry. One of the highlights of the proposed bill will see cryptos being exempted from securities regulations. The bill also seeks to establish a ‘de minimis’ tax exemption for crypto transactions under a specified limit.