Cardano Founder: XRP May Meet SEC's Proposed Security Standards

On March 4th, Cardano founder Charles Hoskinson questioned the U.S. Securities and Exchange Commission’s (SEC) proposed digital asset rules, suggesting that XRP could be automatically classified as a security. Hoskinson stated that under the draft rules, any issuer or coordinating group controlling more than 20% of the network’s tokens might meet the criteria for securities, and Ripple’s holding of over 30% of XRP supply—most of which is locked in escrow—could trigger this threshold.

Discussing the Clarity Act, Hoskinson pointed out that the draft requires token projects seeking digital commodity status to submit an application to the SEC and undergo at least 60 days of review. The SEC can pause or request additional information as needed, extending the approval process. The draft emphasizes that projects must demonstrate sufficient decentralization, with no single entity controlling more than 20% of tokens. Hoskinson believes that although XRP was previously cleared by federal courts as a non-security, under the new standards, it could be classified as a security.

He also warned that these rules might negatively impact proof-of-stake (PoS) networks like Cardano. However, Hoskinson noted that the rules could create a “two-tier system,” where established projects like XRP might be effectively exempted, while smaller new projects would need to prove decentralization to qualify as commodities.

Ripple continues to support the Clarity Act, believing that having a bill is better than none. CEO Brad Garlinghouse remains optimistic about its prospects, expecting it to become law next month. However, the bill still faces disputes over provisions such as stablecoin yield, and negotiations are ongoing, with a possible submission to the Senate Banking Committee later this month.

This discussion highlights the uncertainty surrounding U.S. digital asset regulation and the potential legal and compliance challenges XRP may face under the proposed rules.