Ripple has urged US regulators to define when a digital asset should no longer be considered a security. In a new letter to the SEC's Crypto Task Force, the firm responded to questions raised by Commissioner Hester Peirce on asset classification.

The move seeks greater clarity for market participants amid increasing regulatory scrutiny.

The company referenced its 2023 legal victory, where a court ruled XRP was not inherently a security. Ripple also cited a 2022 legal paper. The paper claims most fungible tokens on secondary markets lack ongoing obligations between buyers and issuers.

It proposed a two-part test to determine when a token becomes independent from its original investment contract.

Ripple says a crypto asset stays a security only if promises remain and holders have enforceable rights. It warned against vague standards like 'sufficient decentralisation,' backing clearer criteria such as trading history and absence of centralised control.

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