Ripple’s XRP Holdings Dropping Below These Limits Will Change the Game

Versan Aljarrah, founder of Black Swan Capitalist, has shared insights into the potential impact of the Digital Asset Market Clarity Act on XRP, suggesting a significant regulatory shift could occur.

Aljarrah's analysis centers on the prospect of Ripple's XRP holdings falling below a specific ownership threshold set by the Act. Such a development could reclassify XRP, potentially freeing it from securities risk and opening avenues for broader institutional and sovereign-level adoption.

The Clarity Act is designed to establish a clear distinction between securities and digital commodities. A key provision of the proposed framework is an ownership cap for issuers and affiliated entities.

Under this framework, a digital asset would be recognized as a commodity under the purview of the Commodity Futures Trading Commission (CFTC) if its issuer and associated entities collectively hold less than 20% of the asset's total circulating supply. This threshold is intended to promote decentralization and prevent any single entity from exerting undue control.

Ripple’s Escrow and the Path to Compliance

A significant point of discussion among community members involves the inclusion of XRP held in escrow within Ripple's total holdings. One commenter, Invested, noted that the Clarity Act's ownership calculation would encompass tokens held in escrow accounts.

This implies that Ripple would likely need to release or divest a substantial portion of its escrowed XRP to meet the decentralization standards stipulated by the legislation. Ripple currently manages billions of XRP in time-locked escrow accounts, which were established to ensure transparency and predictability in the asset's supply schedule.

Another observer, Haik Sahakyan, suggested that based on the current escrow release schedule, Ripple's ownership percentage could potentially fall below the Clarity Act's 20% threshold as early as 2028. Sahakyan also acknowledged that unforeseen market or operational developments could expedite this process, potentially leading to earlier compliance.

Potential Market Impact

Should Ripple's holdings decrease to a point below the limits defined by the Clarity Act, the implications for XRP could be profound. The digital asset would likely be recognized as a decentralized digital commodity, thereby alleviating ongoing securities concerns and mitigating associated political and regulatory risks.

This increased regulatory clarity could enhance XRP's appeal to institutional investors, sovereign entities, and global payment networks that are searching for a compliant and liquid settlement asset.

While the journey toward regulatory compliance may hinge on the progression of Ripple's escrow releases and prevailing market dynamics, the discussion initiated by Aljarrah highlights a critical juncture for XRP.

The Clarity Act presents a defined structure that has the potential to reshape the perception and utility of XRP once its ownership configuration aligns with the requirements for digital commodity classification.