Ripple CEO Brad Garlinghouse has expressed concerns over the SEC’s focus
During the Ripple Swell conference in Dubai, Brad Garlinghouse, CEO of blockchain company Ripple, criticized the U.S. Securities and Exchange Commission (SEC) for losing sight of its mission to protect investors. Garlinghouse questioned who the SEC is actually protecting in their regulatory journey. The SEC has not yet commented on the matter.
The SEC accused Ripple and its executives in 2020 of conducting a $1.3 billion securities fraud by selling XRP tokens to retail investors without proper registration. Ripple argued that XRP is not a security, and in a pivotal victory, a judge ruled in their favor. The SEC dropped its securities law violation charges against Garlinghouse and Ripple executive Chris Larsen in October.
The next step in the case is the remedies discovery process, giving the SEC 90 days for remedies-related discovery. Garlinghouse believes this positive step will thaw the permafrost in the United States, allowing the industry to thrive.
Garlinghouse hopes for federal laws governing digital currencies
Garlinghouse expressed his hope that the U.S. will move away from a litigation-driven approach to crypto regulation and introduce federal laws governing digital currencies through Congress. He criticized the SEC for repeating the same actions and expecting different outcomes, citing a federal judge’s ruling against the SEC in favor of Grayscale’s bitcoin ETF application.
Garlinghouse believes that the SEC’s approach of regulation through enforcement needs to change, and the agency should step back and reconsider its strategies.
What is Ripple?
Ripple is a payments company specializing in cross-border money transfers using blockchain technology. RippleNet, their network, enables financial institutions to send funds internationally. XRP, a cryptocurrency associated with Ripple, acts as a bridge currency between different fiat currencies during cross-border transactions.
Ripple’s technology allows users to convert one currency into XRP, transfer it to another country, and then convert it back into the local currency. This eliminates the need for pre-funded accounts and simplifies cross-border transactions.
While XRP is primarily used for Ripple’s business purposes, it is also traded by investors. The SEC has raised concerns about the impact of digital currencies on retail investors, especially during the bear market in 2018. Unlike bitcoin, Ripple owns a significant amount of XRP in an escrow account and releases tokens quarterly to institutional and retail investors through cryptocurrency exchanges.
Ripple argues that XRP should not be considered a security but rather a currency or commodity. If designated as a security, Ripple would need to comply with extensive regulatory paperwork and disclosures, which could be costly.