Crypto company Ripple expects SEC verdict in six months

The company has spent $200 million defending itself after being accused of illegally selling XRP token, chief executive Brad Garlinghouse says

Brad Garlinghouse, chief executive of Ripple, speaks at the Dubai FinTech Summit on Monday. Pawan Singh / The National

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.

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.”