Here is a "FAQ" from Luxfer:
Few concepts have caused more confusion and controversy in the recreational diving industry than the so-called “40% rule.” While there seems to be general agreement that special cleaning is required when a pressurized oxygen concentration reaches a particular “threshold” percentage, there is disagreement about exactly what that threshold should be and at what pressure it becomes important. Some say 40%; others say 23.5%; still others say anything more than 21% when a gas mixture is pressurized more than 100 psig. It would be helpful to explore the background of this confusion briefly before discussing Luxfer’s position on this vital subject.
The 40% threshold is cited in a single Federal CFR published by the Occupational Safety and Health Administration (OSHA) of the U.S. Department of Labor: 29CFR910.430, which applies to “Commercial Diving Operations” and states in the section titled “Oxygen safety” on page 854: “(1) Equipment used with oxygen or mixtures containing over forty percent (40%) by volume oxygen shall be designed for oxygen service. (2) Components (except umbilicals) exposed to oxygen or mixtures containing over forty percent (40%) by volume oxygen shall be cleaned of flammable materials before use.”
Please note that OSHA also provides a very specific definition about who should—and should not—be considered a “commercial diver” to whom the 40% threshold applies: “Commercial diver means a diver engaged in underwater work for hire excluding sport and recreational diving and the instruction thereof” (46CFR197, page 409; italics added for emphasis).
Even though OSHA clearly excludes sport and recreational divers from the CFR that specifies a 40% threshold, some professionals in the recreational diving industry have nonetheless been citing the OSHA “rule” for many years and maintaining that special cleaning of recreational diving equipment is not necessary with oxygen concentrations of 40% or less. These advocates of the “40% rule” have often stated that the U.S. Navy supports their position, which at one time was true—but no more. In the current applicable military specification (Mil-Std-1330D), the Navy specifies a 25% threshold for oxygen cleaning. Compounding the confusion is the fact that two other OSHA documents, 29CFR1910.146 and 29CFR1910.134, specify an oxygen threshold of 23.5%.
Luxfer recommends 23.5% primarily because they are a member of CGA and because it costs them nothing to do so.
Now, where did "23.5%" come from. Well, grade D air is defined by its composition which includes oxygen content of 19.5% - 23.5%. The upper boundery of this definition is in consideration of fire fighters and the presumed hazard that might result from use of oxygen enriched air or pure oxygen, say if a leak developed while fighting a fire. To keep things tidy, oxygen "safe" criteria were taken to apply to anything above that number regardless of application including pressurized cylinders which must be treated differently due to the emerging practice of defining anything above 23.5% as "oxygen". Otherwise, this somewhat coarse definition would not appear consistent. The CGA have no special knowledge of the fire safety or lack thereof with respect to diver use nor do the diver groups like ANDI. Now, Grade E defines air as containing no more than 22% oxygen and that number could just as well have been applied but Grade D air was in general use by fire fighters at the time. Their systems were generally only capable of this lower grade so the loose definition of "air" carried through, eg, it stuck. Some other govt agencies and diver schools have adopted the 23.5% rule as a way of circling the wagons. They were encouraged to do this by US Divers (Aqualung) which presented information claiming that they could start a fire in scuba gear with 40% mix. The data were never released because they don't exist, IMO. At the time, USD may have thought that they could make some loose change by selling green/yellow regulators at a premium price. Also, there is the matter of insurance rates. Private outfits like ANDI cannot present an appearance of being cavalier with diver safety, not in front of a judge, anyway. If a related matter should come to trial it would be advantageous to them if they could state that their teaching methods met the most conservative standard.