Cardano Founder Says XRP Could Be a Security Under New SEC Rule

TLDR

• Cardano founder Charles Hoskinson criticized a proposed SEC decentralization standard in the Digital Asset Market Clarity Act.
• The proposal requires projects to prove decentralization to obtain digital commodity status.
• The rule states that no issuer or coordinated group can control more than 20% of the network stake.
• Hoskinson said XRP could qualify as a security under this standard.
• Ripple currently holds about 33.61 billion XRP, which equals over 30% of the total supply.

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Charles Hoskinson criticized a draft U.S. crypto rule that could classify many tokens as securities. He argued that XRP may fail the decentralization threshold defined in the proposal. His comments addressed provisions in the Digital Asset Market Clarity Act that outline how digital assets gain commodity status.

XRP and SEC Decentralization Standard

Hoskinson raised concerns during a recent podcast while discussing the Digital Asset Market Clarity Act. He explained that the bill requires projects to request approval before gaining digital commodity classification.

The proposal instructs issuers to file a petition with the U.S. Securities and Exchange Commission. The agency then receives sixty days to evaluate the request and issue a decision.

However, the SEC may pause the review period if it requires more documents or clarification. That process could extend the review timeline before regulators reach a final determination.

Hoskinson focused on the decentralization rule within the proposed framework. He said the rule restricts any issuer or coordinated group from controlling more than twenty percent of the network stake.

He argued that this threshold could classify several established tokens as securities. According to Hoskinson, XRP would fall within that category under the proposed measurement.

He stated during the discussion, “Under that rule, XRP would qualify as a security.” Hoskinson also called the threshold “illegitimate” while outlining its potential effect on various networks.

He added that proof-of-stake systems might also face challenges under the rule. According to Hoskinson, regulators must evaluate network control carefully when defining decentralization.

Ripple Holdings and Commodity Classification Process

Hoskinson based his argument on Ripple’s current XRP holdings. Public blockchain data shows that Ripple controls more than thirty percent of the token supply.

Out of one hundred billion total XRP tokens, Ripple holds about 33.61 billion. Most of those tokens remain locked inside escrow accounts managed by the company.

Hoskinson said that the amount exceeds the twenty percent control limit described in the proposal. Therefore, the rule could automatically classify XRP as a security.

The draft legislation also outlines a formal pathway toward digital commodity classification. Projects must prove that their networks operate without dominant control.

Issuers must submit documentation that demonstrates decentralized governance and distribution. Regulators then review those claims before granting commodity status.

Hoskinson argued that this process may create unequal treatment across the crypto sector. He said larger networks could receive exemptions, while newer projects must prove decentralization.

He described the outcome as a potential “two-tier system” within the digital asset market. In his view, top projects may receive automatic protection from securities classification.

Meanwhile, Ripple continues to support the Digital Asset Market Clarity Act. Ripple CEO Brad Garlinghouse said the legislation provides clearer rules than the current regulatory environment.

Garlinghouse expressed confidence that lawmakers could pass the bill soon. Negotiations continue in the Senate Banking Committee as members prepare for a markup session.

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