The U.S. Senate Banking Committee has scheduled a hearing focused on the structure of the cryptocurrency market, with Ripple CEO Brad Garlinghouse set to testify alongside other key industry representatives. This hearing is part of a broader effort to establish a regulatory framework for digital assets in the U.S.

The hearing will be held on Wednesday, July 9, at 10:00 AM Eastern Time, according to reporter Eleanor Terrett. The hearing will consider new legislative proposals put forth by Republican Senators Tim Scott, Cynthia Lummis, Bill Hagerty, and Thom Tillis, which aim to establish a clearer distinction between digital assets classified as securities and those considered commodities.

The proposed bill seeks clarity on regulatory issues

The law aims to eliminate ambiguity in how federal agencies regulate cryptocurrencies. Under the current system, the Securities and Exchange Commission (SEC) regulates securities, while the Commodity Futures Trading Commission (CFTC) is responsible for commodities.

However, many tokens, such as XRP, have found themselves in a regulatory gray area, facing inconsistent classifications from different government agencies over time. The proposed bill outlines specific criteria to determine whether a digital asset should fall under the jurisdiction of the SEC or the CFTC.

Brad Garlinghouse, head of Ripple Labs, will join other notable figures expected to testify at the hearing, including Blockchain Association board member Summer Mersinger, CEO of Chainalysis Jonathan Levin, and Paradigm researcher Dan Robinson. Their testimonies are expected to provide insights into the industry's experiences with regulatory fragmentation and its impact on innovation and growth.

Garlinghouse's inclusion in the hearing comes amid ongoing legal disputes between Ripple and the SEC. Attorney John Deaton, representing tens of thousands of XRP holders, has highlighted Ripple's long-standing interactions with various federal agencies as evidence of the ongoing regulatory confusion in this area.

According to Deaton, Ripple representatives began meeting with federal agencies such as the Federal Reserve, SEC, and the U.S. Department of the Treasury in 2013 to explain how XRP and its underlying ledger work. In 2014, the Government Accountability Office (GAO) identified XRP as a 'virtual currency,' further complicating the government's positions on this token.

In 2015, Ripple agreed to comply with banking laws under the Financial Crimes Enforcement Network (FinCEN) after paying a fine. Despite this agreement and subsequent information-sharing arrangements between FinCEN and the SEC, the regulatory status of XRP remains unresolved.

In 2018, SEC enforcement lawyers examined XRP under the Howey Test but chose not to pursue enforcement action, as noted in federal court filings. That same year, Ripple executives, including Garlinghouse, worked directly with SEC officials in hopes of receiving regulatory guidance. However, no violations were reported in those discussions.

Government viewpoint conflicts on XRP

The issue was exacerbated when the Financial Stability Oversight Council (FSOC) released a report in 2019, co-signed by the heads of both the SEC and CFTC, which referred to XRP as a type of virtual currency.

Coinbase, one of the largest exchanges in the U.S., also evaluated XRP under its legal framework and proceeded with a listing after receiving no objections from the SEC.

MoneyGram, a major financial services company, also disclosed in a 2019 SEC filing that it would use XRP for cross-border transactions. Deaton noted that although the SEC was aware of MoneyGram's intention to sell XRP in the secondary market, they did not intervene.

Despite these precedents, the SEC filed a lawsuit against Ripple in December 2020, alleging that all XRP sales since 2013 were unregistered securities offerings.

With conflicting interpretations from various agencies, including FinCEN, FSOC, and SEC, Garlinghouse's testimony is expected to emphasize the need for a unified and transparent regulatory framework. Industry participants hope the hearing will serve as a turning point in establishing consistent standards for classifying and overseeing digital assets in the U.S. #DayTradingStratergy