- Ripple is confident that US banks will start wanting to use its XRP cryptocurrency for cross-border transactions after a judge gave the firm a partial victory in its battle with the SEC, General Counsel Stu Alderoty told CNBC.
- A judge ruled that XRP was not itself necessarily a cryptocurrency, in a development with major implications for the digital asset industry.
- However, it was not a total victory for Ripple – the judge also ruled that sales of XRP by Ripple to institutional buyers count as unregistered sales of securities.
In this photo illustration, a visual representation of the digital cryptocurrency Ripple is shown on January 30, 2018 in Paris, France.
Chesnot | Getty Images
Blockchain startup Ripple is confident that US banks and other financial institutions in the country will begin to show interest in adopting its XRP cryptocurrency in cross-border payments after a landmark ruling determined that the token was not necessarily a security in itself.
The San Francisco-based firm expects to start talks with US financial firms about using its On-Demand Liquidity (ODL) product, which uses XRP for money transfers, in the third quarter, Stu Alderoty, Ripple’s general counsel, told CNBC in an interview. last week.
Last week, a New York judge handed down a watershed ruling for Ripple that ruled that XRP itself is “not necessarily a security on its face,” partially contesting claims by the US Securities and Exchange Commission against the company.
Ripple has been battling the SEC for the past three years over allegations by the agency that Ripple and two of its executives conducted an illegal $1.3 billion offering via the sale of XRP. Ripple contested the claims, insisting that XRP cannot be considered a security and is more akin to a commodity.
Ripple’s business suffered as a result, and the company lost at least one customer and investor. MoneyGram, the US money transfer giant, left its partnership with Ripple in March 2021.
Meanwhile, Tetragon, a UK-based investor that previously backed Ripple, sold its stake back to Ripple after unsuccessfully trying to sue the company to redeem the cash.
Asked if the ruling meant US banks would return to Ripple to use its ODL product, Alderoty said: “I think the answer to that is yes.”
Ripple also uses blockchain in its business to send messages between banks, sort of like a blockchain-based alternative to Swift.
“I think we hope that this decision will give financial institution customers or potential customers the comfort to at least come in and start talking about what problems they’re experiencing in their business, real-world problems in terms of moving value across borders. without to incur obscene fees,” Alderoty told CNBC on Friday.
“Hopefully this quarter will generate a lot of conversations in the US with customers, and hopefully some of those conversations will actually turn into real business,” he added.
Ripple now sources most of its business from outside the US, and Alderoty previously told CNBC that “[Ripple]the customers and revenue are all driven outside the US, although we still have many employees in the US,” he added.
Ripple has over 750 employees globally, with about half of them based in the United States
XRP is a cryptocurrency that Ripple uses to move money across borders. It is currently the fifth largest cryptocurrency in circulation, with a market capitalization of $37.8 billion.
The company uses the token as a “bridge” currency between transfers from one fiat currency to another — for example, US dollars to Mexican pesos — to solve the problem of needing pre-funded accounts on the other end of a transfer to wait for money to be processed.
Ripple says XRP can enable money movements in a fraction of a second.
Still, the ruling did not represent a total victory for Ripple. While the judge stated that XRP was not a security, they also said that some sales of the token qualify as securities transactions.
For example, about $728.9 million of sales of XRP to institutions the company worked with qualified as securities, the judge said, saying it was a joint enterprise, an expectation of profit.
Alderoty admitted that it was not a total win for Ripple and that the company would study the decision over time to see how it affects the business.
“She [Judge Analisa Torres] found — although we disagreed with her — that our previous sales directly to institutional buyers had the characteristics of a security and should have been registered,” he said.
He said that Ripple’s business as it stands will not be affected by that part of the ruling, as its customers are mainly located outside the US
“We’re going to study the judge’s decision, we’re going to look at the customers’ need to look at the market, and see if there’s a situation here that matches the four corners of what the judge found in terms of institutions,” he said.