Cryptocurrency and blockchain company Ripple expects a decision in a US Securities and Exchange Commission lawsuit to come in the next three to six months.
The SEC initiated a lawsuit against Ripple in 2020, alleging that the company illegally sold XRP — a cryptocurrency created in 2012 — to investors without first registering it as a security.
The company has spent $200 million defending itself against the SEC lawsuit, Brad Garlinghouse, chief executive of Ripple, told the Dubai FinTech Summit on Monday.
Ripple disputes the claim, saying that the token should not be considered an investment contract and is used in its business to arrange cross-border transactions between banks and other financial institutions.
“But even after the lawsuit, the US needs to provide clear rules of the road and regulatory clarity. The lawsuit will help. Other countries around the world will be ahead of where the US is in adopting blockchain technologies,” Mr Garlinghouse told The National.
“If we win the lawsuit, it’ll be clear what XRP is, but the rest of the industry is still going to be unclear. And the whole crypto industry needs regulatory clarity in the US to really thrive.”
XRP was once the third-largest cryptocurrency, commanding a market value of $120 billion in early 2018.
Its value has dropped sharply since then, amid the US regulatory scrutiny and a wider downturn in Bitcoin and other digital currencies.
XRP now has a market capitalisation of about $23.9 billion, according to CoinMarketCap data. The token peaked at $3.84 in January 2018. On Monday, it was trading at $0.44.
The past 12 months has been volatile for the global cryptocurrency sector, which is only now emerging from a “crypto winter” after the collapse of a number of large platforms such as Celsius, Three Arrows Capital and Sam Bankman-Fried's FTX, which filed for bankruptcy in the US on November 11.
“One of the silver linings for Ripple is we’re at the end of our journey [in terms of the regulatory lawsuit]. We’re two and a half years into this lawsuit. We should have a decision pretty soon,” Mr Garlinghouse said.
“Some of these other companies are beginning their journey, and it’s expensive and a distraction. It makes it harder to grow your business in the largest economy in the world ... I’d rather see clarity for the whole industry.”
Most leading US-based cryptocurrency companies are investing more outside the country than within right now, he said, adding that without regulatory clarity, there would either be lawsuits or the threat of lawsuits against them.
He praised the UAE and Dubai’s Virtual Assets Regulatory Authority for being role models for its framework governing digital assets.
Meanwhile, Mr Garlinghouse said Dubai, Singapore and Switzerland will emerge as global financial capitals in the next 10 to 20 years due to their regulatory clarity.
He described them as progressive not only in protecting consumers but in also allowing innovation.
“That is critical and we haven’t seen that in some jurisdictions like the US,” he said.
The Mena region accounts for a fifth of Ripple’s global customer base. South-east Asia is also another growth market for the company, which has 90 per cent of its business outside the US, Mr Garlinghouse said.
Ripple will expand its presence in Dubai by opening a new office in the Dubai International Financial Centre in six months.
In 2020, the company chose the DIFC as the location for its Mena headquarters.
“We chose Dubai as a key office for Ripple, in large part due to its forward-thinking regulatory environment,” Mr Garlinghouse said.
“Regulators here have risen to the challenge of establishing a framework that allows the local crypto industry to thrive, create jobs and increase economic growth, while also ensuring participants act in a responsible manner.”
Ripple hired more than 300 people globally last year amid layoffs in the wider crypto industry.
The growth of customer activity in the UAE is reflected in employee activity. Ripple is hiring more people in Dubai while employees from other markets are also relocating here, he said.
Even after the lawsuit, the US needs to provide clear rules of the road and regulatory clarity
Brad Garlinghouse,
chief executive of Ripple
Besides major regional banks leaning into Ripple’s technology, it has also signed up smaller players such as Pyypl, a FinTech that is building remittance-based solutions to lower costs and speed up transactions, he said.
Mr Garlinghouse said he was “very bullish” about the cryptocurrency industry in the long term because it was being increasingly used to focus on utility and solving real problems.
“There's definitely speculation that's part of the market today. In the short term, you have the unknowns around regulation,” he said.
“In the long term, those are just speed bumps. What you have seen over the 10-plus years that the crypto industry has existed, you've seen many speed bumps such as FTX and Terra Luna, and some of these are more than speed bumps.
“But the fact that you're still seeing the industry do well in some ways, despite all these challenges, reflects its resilience.”
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Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Quick pearls of wisdom
Focus on gratitude: And do so deeply, he says. “Think of one to three things a day that you’re grateful for. It needs to be specific, too, don’t just say ‘air.’ Really think about it. If you’re grateful for, say, what your parents have done for you, that will motivate you to do more for the world.”
Know how to fight: Shetty married his wife, Radhi, three years ago (he met her in a meditation class before he went off and became a monk). He says they’ve had to learn to respect each other’s “fighting styles” – he’s a talk it-out-immediately person, while she needs space to think. “When you’re having an argument, remember, it’s not you against each other. It’s both of you against the problem. When you win, they lose. If you’re on a team you have to win together.”
