Sumary of Toward A Ripple Test At The SEC:
- Two explicit criteria required John Berlau of the Competitive Enterprise Institute suggests two minimum requirements to determine whether a digital asset is a security: (a) an explicit promise of ownership or share of the firm’s revenues or profits, and (b) an explicit promise of return on investment.
- Berlau suggests that these two disclosures are necessary to distinguish cryptocurrency investment from the larger world of investment in which the SEC has no jurisdiction even though vendors hawk the investment value of art, comic books, action figures, cars, and other collectibles.
- Berlau notes that state and federal fraud statues already encompass cryptocurrencies and that these laws could be further clarified to assign jurisdiction of cryptocurrency to a specific agency.
- Berlau describes these issues in Cryptocurrency and the SEC’s Limitless Power Grab.
- She suggests that all cryptoassets should be classified as securities so that the antifraud provisions could be enforced to protect consumers.
- She observes that tokens can exhibit some characteristics of securities, but they perform very different functions and hence need a new regulatory framework which takes into account applications and users.
- Mathematician Petrus Potgieter observes that any expectation of profit from ownership is significantly related to the general outlook on cryptocurrencies and not solely to the efforts of Ripple Labs.
- He cites the evidence that XRP’s fluctuation is highly correlated (around 0.3) with Bitcoin and supports a “Ripple Test” which would recognize that the asset may have some aspect of a currency, have no explicit claim of profit, and whose value is not solely attributed to the efforts of the promoter or third party.