Cardano Founder Warns Proposed SEC Rule Would Classify XRP as a Security
Cardano founder Charles Hoskinson criticized a proposed SEC rule and the Digital Asset Market Clarity Act provision that would require projects to demonstrate sufficient decentralization to qualify as digital commodities. Under the draft standard, no single issuer or coordinated group may control more than 20% of a network’s stake; Hoskinson argued this would likely cause XRP to be classified as a security because Ripple holds roughly 33.6% of XRP in escrow (about 33.61 billion of 100 billion total supply). He warned the rule could also harm proof-of-stake networks, including Cardano, and create a two-tier system where the largest, established tokens are effectively grandfathered while smaller projects must petition the SEC for commodity status. The bill requires projects to apply for “graduation” to commodity status, with the SEC given 60 days to review but able to pause or request more information, potentially prolonging decisions. Ripple maintains that a federal court ruling already established XRP’s non-security status and supports the Clarity Act as preferable to no legislation. The bill still faces debate—particularly over stablecoin yield provisions—before a possible Senate Banking Committee markup. (Main keywords: XRP, SEC proposed rule, decentralization standard, Digital Asset Market Clarity Act, Ripple, Charles Hoskinson.)
Bearish
The news raises regulatory uncertainty for XRP and, by extension, other major tokens that exceed the draft’s 20% control threshold. Hoskinson’s warning that the SEC’s proposed decentralization standard could reclassify XRP as a security increases legal and market risk for XRP holders and traders. Regulatory classification threats historically depress price and trading volume as investors reassess legal exposure (see past SEC actions against tokens where enforcement led to negative price impact). Short-term, expect increased volatility and potential sell pressure on XRP and correlated tokens as traders price in regulatory risk and await legislative or agency clarifications. Mid-to-long term, outcomes depend on legislative changes, court interpretations, or explicit SEC guidance: a favorable clarification or exemption could restore confidence (bullish), while persistent ambiguity or enforcement could sustain downward pressure (bearish). Additionally, the prospect of a two-tier system disadvantaging newer projects could shift capital toward established, grandfathered tokens, concentrating liquidity. Overall, the immediate market reaction is likely negative for XRP and could create temporary contagion among PoS and mid-cap altcoins until legal risk is resolved.