Alderoty’s Critique of Gensler’s Remarks
Stuart Alderoty, the Chief Legal Officer (CLO) of cryptocurrency and payment service giant Ripple (XRP), has expressed strong objections to recent statements made by the Chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler. Alderoty voiced his concerns following Gensler’s recent participation in a congressional hearing.
During his address to the U.S. Senate Appropriations Committee, Gensler emphasized the possibility that cryptocurrency tokens might be classified as securities. Reacting sharply to these comments, Alderoty observed:
“In the recent Senate hearing, Mr. Gensler inaccurately represented the law, specifically the Howey test, by implying that tokens inherently qualify as investment contracts. Is it justifiable for the SEC to persistently circulate these misconceptions?”
Ripple’s Triumph in the Courts
Ripple experienced a significant legal victory on July 13, when it was ruled that the XRP token’s programmatic sales, which are sales executed on exchanges, do not qualify as securities. Following this ruling, Alderoty highlighted that, legally, XRP was not a security.
Ripple’s CEO, Brad Garlinghouse, also shed light on the significance of this judgment. He emphasized that the decision challenges the SEC’s position, which tends to categorize most tokens as securities. Moreover, Garlinghouse expressed optimism that this ruling might pave the way for favorable precedents for other digital tokens within the U.S.
Gensler’s Extended Observations
During the U.S. Senate Appropriations Committee’s examination of the SEC’s proposed 2024 budget, Gensler alluded to the fact that most cryptocurrency projects had a team of entrepreneurs behind them, suggesting the potential for these tokens to come under the Securities Act’s purview.
Additionally, in a conversation with Senator Richard Durbin regarding the measures to safeguard American consumers from cryptocurrency risks, Gensler pointed out that the SEC holds considerable power. He underscored that only a handful of cryptocurrencies fall outside the SEC’s domain.
However, Gensler clarified that Bitcoin, unlike other assets, does not exhibit characteristics of an investment contract as per securities laws. Thus, its regulation would be the responsibility of the Commodity Futures Trading Commission (CFTC), a distinct regulatory body.
