SEC Considers Classifying XRP as a Commodity, XRP Overtakes ETH in Market Value

The U.S. Securities and Exchange Commission is currently in discussions to potentially classify XRP as a commodity, a significant development in Ripple Labs’ ongoing legal battles. This potential reclassification of XRP comes as its fully diluted valuation (FDV) has exceeded that of Ethereum, indicating a noteworthy shift in the blockchain industry landscape.

The SEC’s reconsideration of XRP’s status follows a ruling in July 2023 by U.S. District Judge Analisa Torres, determining that XRP is not inherently a security. This ruling weakened the SEC’s case against Ripple and has prompted regulators to revisit their approach, suggesting a potential milestone for XRP and its investors.

Ethereum’s treatment as a “pure commodity” has become a crucial benchmark in the discussion surrounding XRP’s regulatory classification. Despite Ethereum’s initial fundraising through an Initial Coin Offering (ICO), it has since obtained commodity status, allowing for less regulatory scrutiny within its ecosystem. This raises important questions about whether XRP should receive similar treatment and if this shift could open the door for XRP-based exchange-traded funds (ETFs) in the future.

Regulatory uncertainties have been a significant obstacle in the approval of XRP ETFs, with Bloomberg ETF analyst James Seyffart highlighting the need for clarity in this area. Ripple’s ongoing legal battle with the SEC has been a key factor in delaying the approval of spot XRP ETFs. However, a potential reclassification of XRP as a commodity could streamline the approval process, similar to the recent acceptance of a Bitcoin spot ETF.

As settlement discussions between the SEC and Ripple near their conclusion, there are indications that the new SEC leadership is looking for a fresh start in crypto enforcement. Negotiations are underway to potentially adjust the $125 million fine imposed on Ripple and revise restrictions on XRP sales to institutional investors.

Furthermore, XRP’s FDV surpassing that of Ethereum signals a shift in the market dynamics, with the XRP Ledger gaining traction in decentralized finance (DeFi) and attracting increased institutional interest. This success comes amidst challenges faced by Ethereum post its Dencun upgrade in March 2024 and the rise of competitors like Solana.

In conclusion, the potential reclassification of XRP as a commodity, coupled with a settlement between Ripple and the SEC, may bring significant changes to the cryptocurrency landscape. As XRP’s momentum continues to grow, Ethereum faces mounting competition, emphasizing the evolving dynamics of the industry shaped by regulatory clarity, institutional DeFi adoption, and supportive leadership.