Ripple Proposes a Crypto-Friendly Approach to Regulations

Ripple makes a point with the regulators with their version of framework for cryptocurrency and digital asset regulation

The ‘Real’ Framework

Ripple released a framework for regulation for cryptocurrency and digital asset regulation on November 16 and titled it, ‘A Real Approach to Cryptocurrency Regulation’ as US regulators are still mulling on the right approach to regulate the crypto industry. 

Ripple underlined the tone of the framework in its introduction by saying, ‘While providing consumer and market protections through regulations is imperative, opportunity for innovation and growth must also be at the heart of any policy framework.’

The three-page framework is concise and outlined the general policy and approach that ought to be taken by the authorities. Three main proposals were put forth, they are: –

Active dialogue between regulators and market participants for a tailored and effective policy outcome

The existing regulatory framework can be adapted to regulate cryptocurrencies

Creation of a sandbox for development without needing to comply with existing laws

Source: Ripple is echoing the sentiments of other industry players like Coinbase on the regulators’ lack of mutual consultation with market stakeholders  

Setting the Tone Right

The focus of the framework has one common thread. It aims to create a conducive environment for innovation in the crypto space, whilst maintaining a safe environment for investors to participate. This is becoming increasingly important as the crypto space is growing exponentially and the regulators appear to be dragging their feet on the long-overdue regulatory framework. 

Ripple draws reference to a bill introduced in August titled ‘Eliminate Barriers to Innovation Act 2021’ which aims to foster innovation. The bill proposes an open dialogue and mandates a collaborative working group between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) with market players to strike a balance between the interests of the industry and consumer. 

Ripple also looked at the Securities Clarity Act (SCA), which introduces a new term, ‘investment contract asset’ which demarcates assets from any securities offerings that the asset is part of. The Digital Commodity Exchange Act (DCEA) which is complementary to the SCA defines ‘digital commodity exchanges’ and clothes the CFTC with regulatory oversight. These bills would provide a better path for compliance rather than relying on the archaic definition of security in Howey’s Test

Singapore is Making Strides 

Ripple’s frustration with the authorities is shared by many industry players. Brian Armstrong the Chief Executive Officer of Coinbase took to Twitter in September expressing his frustration on SEC’s lack of pro-active communication and transparency in dealing with industry players. One jurisdiction that is setting an example to the rest of the world is Singapore. 

Source: Singapore is getting a head start with its crypto friend policies, but still maintains a strong regulatory framework for investor protection

Singapore is establishing itself as a crypto hub with its crypto-friendly policies. 

Ravi Menon, the Managing Director of Monetary Authority of Singapore (MAS) in an interview with Bloomberg says, “We think the best approach is not to clamp down or ban these things…But not to get into this game, I think risks Singapore being left behind. Getting early into that game means we can have a head start, and better understand its potential benefits as well as its risks”   

The question should no longer be focused on curtailing innovation. This new asset class may be unfamiliar to the regulators, hence the initial resistance, but it is here to stay.

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