XRP Could Already Meet CLARITY Act Digital Commodity Standards, Lawyer Says
Attorney Bill Morgan analyzes whether XRP satisfies the requirements to qualify as a digital commodity under the proposed CLARITY Act, suggesting it may already meet the legislation's criteria through multiple pathways.
Understanding the CLARITY Act’s Framework
Recent analysis from attorney Bill Morgan suggests that XRP could already satisfy the stringent requirements to qualify as a digital commodity under the proposed CLARITY Act. This assessment addresses growing concerns about whether the blockchain token would meet the legislation’s “mature blockchain system” criteria, a classification that could significantly impact its regulatory treatment.
The proposed legislation establishes specific benchmarks for digital commodities, most notably requiring that no issuer or affiliated entity beneficially controls 20% or more of the token’s total supply. Beyond this ownership threshold, the framework incorporates additional governance-related requirements designed to ensure decentralization and operational independence. Morgan’s analysis indicates that the maturity framework extends beyond the simple 20% threshold, with provisions within the bill offering alternative pathways for XRP to qualify, particularly through a pre-existing-system provision that hinges on XRP’s distribution history—specifically, that more than half of the token’s total supply resides outside Ripple’s direct control.
Multiple Qualifying Pathways for XRP
The CLARITY Act framework offers more flexibility than initially apparent. One significant provision involves exchange-traded products; the Senate draft includes specific cutoffs for network tokens with exchange-traded products listed on national securities exchanges. XRP’s existing ETF presence could position it to benefit from this provision. Even if XRP fails to achieve classification as a mature blockchain under the legislation, this would not automatically render every XRP transaction subject to securities laws. The CLARITY Act makes an important distinction between classifying a digital commodity itself and regulating investment contracts that reference that commodity, meaning regulatory treatment for specific transactions could differ from the underlying token’s legal status.
Data on Ripple’s holdings underscores the distribution argument. The company directly controls approximately 4.74 billion XRP, while maintaining over 32 billion XRP in escrow accounts. This means the vast majority of XRP’s total supply exists outside Ripple’s immediate operational control, which strengthens the decentralization argument supporting the pre-existing-system provision.
Legislative Status and Implications
The regulatory landscape shifted recently when the Senate postponed a floor vote on the CLARITY Act, a move viewed as a setback by many crypto regulation proponents. However, perspectives on the bill’s future remain mixed. Justin Slaughter, vice president of regulatory affairs at Paradigm, recently stated that despite the postponement, the legislation should not be considered dead, suggesting continued possibility for eventual passage.
Should XRP qualify as a digital commodity under the legislation, it would face primary oversight by the Commodity Futures Trading Commission rather than the Securities and Exchange Commission—a distinction viewed favorably by the crypto community. For XRP holders and the broader cryptocurrency market, favorable classification could meaningfully improve the regulatory environment and establish important precedent for other established digital assets.
Source: U.Today. Not financial advice.