SEC Objects Ripple’s Proposed Stablecoin Launch in New Filing

• The SEC’s latest filing against Ripple has reignited concerns over cryptocurrency regulations in the U.S.
• Ripple’s plan to launch a dollar-backed stablecoin faces additional hurdles due to the SEC’s stance.
• The Ripple lawsuit’s outcome can impact how cryptocurrencies are regulated in the U.S.

The legal battle between Ripple Labs , a blockchain company, and the U.S. Securities and Exchange Commission (SEC) took a new turn this week. A document filed by the SEC reignited concerns over the regulatory landscape for cryptocurrencies in the United States.

The SEC contends that Ripple’s core business revolves around the unregistered sale of XRP , their native digital asset. This argument, outlined in a redacted remedies reply brief , could have significant implications for the broader cryptocurrency industry.

SEC Intensifies Scrutiny of Crypto Industry

The SEC’s actions against Ripple are part of a broader trend of increased scrutiny of the cryptocurrency industry. In recent months, the SEC has issued Wells notices, which signal potential enforcement actions, to major crypto players like Uniswap , Consensys, and Robinhood.

In a recent interview, SEC Chairman Gary Gensler emphasized the need for tighter regulations in the crypto space. Citing cryptocurrencies’ significant but potentially risky nature, Gensler highlighted the SEC’s role in safeguarding the $110 trillion capital market. 

“How do we ensure that the American investor is protected? And right now, they’re not getting the required or needed disclosures. The intermediaries in the center of this rather centralized market are generally conflicted and doing things we would never allow the New York Stock Exchange to do. The New York Stock Exchange is not allowed to trade against the investors,” Gensler stated .

Notably, he remained ambiguous on classifying Ethereum (ETH) as a security or commodity, pointing to a lack of adequate investor disclosures. Additionally, he criticized the practices of intermediaries in centralized crypto exchanges.

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The SEC’s stance and ongoing legal battles, like the one with Ripple Labs, create uncertainty for cryptocurrency companies and investors alike. The final outcome of the Ripple case will likely significantly impact how cryptocurrencies are regulated in the United States.

Ripple’s Stablecoin Plans Under Scrutiny

The SEC’s new filing targets XRP and highlights Ripple’s plans to launch a new crypto asset. While the document doesn’t explicitly name the asset, many believe it refers to Ripple’s proposed U.S. dollar-backed stablecoin . 

Earlier this year, reports emerged about Ripple’s intention to create a stablecoin pegged to the U.S. dollar, backed by reserves of U.S. Treasuries and dollar deposits. This development adds another layer of complexity to the lawsuit. The SEC’s stance implies that the upcoming stablecoin might also be considered an unregistered security. 

Ripple’s Chief Legal Officer, Stuart Alderoty, slammed the SEC’s approach, accusing them of misapplying regulations and misleading the court. 

He expressed confidence in the court’s ability to deliver a fair verdict and criticized the SEC’s disregard for international regulatory frameworks.

On the Flipside

• The SEC’s approach differs from frameworks in other countries, potentially creating confusion for international crypto businesses.
• The lack of clarity on how the SEC classifies Ethereum (ETH) creates uncertainty for other crypto projects. Businesses are left guessing if their tokens will be deemed securities.

Why This Matters

This escalating battle between the SEC and Ripple not only casts a shadow over XRP’s future but also raises questions about the regulatory fate of stablecoins and potentially other crypto assets, creating a climate of uncertainty that could stifle innovation and hinder the growth of the entire US cryptocurrency industry.

The recent SEC rebuttal in the Ripple case highlights their ongoing strategy. This article explores the legal arguments being made by the SEC:
SEC Repels Ripple’s Challenge in Contested Witness Dispute

This legal battle between Ripple and the SEC is far from over. If you’re curious about a lawyer’s take on the potential outcome, check out this article:
Lawyer Predicts Ripple Win in SEC Case: Good News Looming?