Tuesday, February 20, 2024
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SEC Writes New Crypto Rule: How Could It Affect XRP Holders’ Passive Income Engine (AMM)

The crypto community is grappling with the recent adoption of new crypto rules by the United States Securities and Exchange Commission (SEC), which has created uncertainty surrounding the upcoming XRP Ledger Automated Market Maker (AMM) and decentralized finance (DeFi) protocols.

While the main focus is on how liquidity providers will be affected, the implications go beyond that, potentially impacting exchanges and even Ripple’s products.

Read Also: Here’s When XRP Holders Will Start Earning Passive Income as AMM Amendment Passes

Under the new rules, liquidity providers dealing with assets considered securities, including some cryptocurrencies, are now required to register with the SEC. However, the lack of clarity regarding who exactly needs to register—AMM code developers, individual liquidity providers, or both, leaves the industry in confusion, making it difficult to comply fully.

XRPL AMM in the Spotlight

The XRP community is particularly concerned about how these rules will impact the upcoming XRPL AMM, which aims to allow XRP holders and others to earn passive income through liquidity provision.

While retail participants might be exempted if they have less than $50 million in assets, the broader implications remain unclear. Despite a recent court ruling that declared XRP a non-security asset, the ever-changing regulatory landscape keeps everyone on edge.

Ripple’s Liquidity Hub Under Scrutiny

Attorney Bill Morgan has raised an important point about how the rule could affect Ripple’s Liquidity Hub, a product designed to facilitate connections between businesses and crypto liquidity sources. The SEC’s expanded definition of “dealing activity” could subject Liquidity Hub to further scrutiny, adding additional complexity for Ripple and its clients.

The SEC’s new rules have broader implications that extend beyond AMMs. They potentially redefine an exchange, encompassing centralized and decentralized platforms like the XRPL DEX.

This expansion could require registration as an Alternative Trading System (ATS), raising concerns about stifling innovation and undermining the fundamental principles of decentralization.

Read Also: Effect of the Delayed XRPL AMM Amendment On XRP Holdings Ignites Community Discussion

Seeking Clarity

The crypto industry needs clear and concise regulations from the SEC. The current lack of clarity creates an atmosphere of fear and uncertainty, impeding growth and innovation. To navigate this complex landscape and foster a healthy crypto ecosystem, open dialogue an d collaboration between regulators and industry leaders are crucial.

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The SEC’s new rules represent a significant development in the regulatory landscape of the crypto industry. While the full impact on the XRPL AMM and other DeFi protocols remains uncertain, the industry must prepare for a period of adaptation and potential change.

By working together and advocating for clear regulations, the crypto community can ensure a future that encourages innovation and safeguards investors.


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Adedoyin Aka
Adedoyin Aka
Adedoyin is a graduate of Law and a Crypto & Blockchain expert who strongly believes that Blockchain is the future. At TimesTabloid, she focuses on crypto and blockchain educational content.
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