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The Ripple stablecoin is being targeted as an unregistered crypto asset by the SEC.
In its May 7 redacted remedies reply brief, the US Securities and Exchange Commission (SEC) has characterized Ripple’s proposed stablecoin as an “unregistered crypto asset,” arguing that it serves as further evidence of the company’s potential to continue engaging in unregulated activities without a permanent injunction.
The SEC’s latest court filing comes after Ripple revealed plans to issue a stablecoin in April, although the company has not provided additional details about the token since the initial announcement. The regulator maintains that Ripple’s primary business has been the unregistered institutional sales of XRP since its inception and that it will persist in this practice if an injunction is not granted.
The SEC also dismissed Ripple’s assurances that it would not violate US securities law due to its licenses in other jurisdictions, likening the argument to “saying a New York restaurant need not obtain a liquor license because it obtained a fishing license in California.”
The regulator insisted that the court impose a substantial penalty on Ripple to deter both the company and potential copycats from similar actions in the future.
In the filing, the SEC’s lawyer said that given the “nearly $1 billion Ripple gained violating Section 5, the multi-billion-dollar business it built selling XRP (accounting for the value of Ripple’s massive XRP holdings and its cash on hand), the ‘low’ penalty Ripple demands would be a ‘slap on the wrist’ that neither punishes nor deters.”
Ripple’s chief legal officer, Stuart Alderoty, has criticized the SEC’s filing as baseless, calling it another example of the regulator’s failure to apply the law. Alderoty also noted the SEC’s disregard for crypto frameworks in other jurisdictions.
“[…] just when you think the SEC can’t sink any lower, if you are a financial regulator outside the US and have done the hard work of establishing comprehensive crypto licensing frameworks, know that the SEC has no respect for you and thinks you are handing out the equivalent of fishing licenses.”
The SEC is seeking almost $2 billion in fines from Ripple, while the crypto firm contends that the court should reject this demand and propose a civil penalty not exceeding $10 million.
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