Ripple Labs CEO Brad Garlinghouse has repeatedly spoken out in the past with calls for crypto regulation in the US. At the World Economic Forum in Davos in early 2023, Garlinghouse emphasized in the CNBC show “Squawk Box Europe” that the cryptos themselves were not the problem in the most recent scandals surrounding the insolvent crypto exchange FTX and its once celebrated ex-boss Sam Bankman-Fried are, but fraudulent intentions. That is why reputable crypto companies emerged stronger from the crisis. “There are real businesses that are being expanded and will survive the test of time. Crypto is here to stay,” said the Ripple boss in a cash.ch interview.
Central question in the Ripple process: Can XRP be classified as a security?
At the beginning of the year, Brad Garlingouse was optimistic about the legal dispute with the SEC, which has now been going on for more than two years. He clarified his position again in the CNBC interview and even described the previous behavior of the SEC as “embarrassing”.
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The subject of the process is the central question of whether XRP should be classified as a security. The US Securities and Exchange Commission sees Ripple as a breach because the cryptocurrency was launched in 2012 and was not registered as a security with the SEC before it was sold.
So far, the SEC has left little room for a comparison in the process, which Ripple would like to close, with statements that it considers almost all cryptocurrencies to be securities. “We have always said that we would like to settle, but it requires one very important thing, and that is that on a go-forward basis, it is clear that XRP is not a security,” Ripple CEO said in the CNBC interview. He further described his negotiations with the SEC outside of the process as non-transparent: “Not once did they tell me that they classify XRP as a security. And later it said that they see XRP as a security the whole time, but we do didn’t say. That doesn’t feel like honest business-government collaboration.”
However, Garlinghouse called the SEC’s position “downright embarrassing”. “I thought it was clear from the start that the facts are on our side and the law is on our side,” he said, expressing his optimism about the upcoming court decision. He is sure that the court will follow Ripple’s reasoning.
Ripple process: Pointing the way for the crypto industry
Should the court follow the SEC’s reasoning, the impact on the crypto industry would be enormous: XRP transactions would be illegal. A ruling along these lines would set a precedent for cryptocurrency trading. The result would be stricter requirements for crypto trading, because crypto and blockchain projects to be classified as securities would then have to meet extensive investor protection and the transparency requirements of the SEC.
Ripple Process: Crucial Turn Found for XRP?
Ripple lawyer John Deaton shared a document on Twitter in May in which he claims to have found a key clue in a footnote that could decide the lawsuit in Ripple’s favour.
Read this short 🧵 please. When you look at all the other SEC-LIT-EMAILS cited in Ripple’s opposition, they are redacted. The one about there being reasonable grounds to not believe XRP satisfies all the Howey factors is not redacted. https://t.co/qoaCbjk7rg pic.twitter.com/Nc6kfNMJ4c
– John E Deaton (@JohnEDeaton1) May 21, 2023
“There are reasonable grounds for concluding that XRP does not meet all of the elements of the Howey analysis and is therefore not a ‘securities’ within the meaning of the federal securities laws,” reads the relevant passage, which appears to be a quote from an internal email from the SEC represents. With all the evidence that the US Securities and Exchange Commission did not want to classify XRP as a security supports the Ripple defender’s argument, this footnote could now be crucial. It is intended to prove that the SEC actually discussed the classification of XRP internally before the Hinman speech in 2018.
Hinman documents no longer classified
In her most recent interim decision, the judge Analisa Torres, who is responsible for the Ripple process, also ordered that the so-called “Hinman documents” no longer be kept under lock and key. These are a central part of Ripple’s litigation strategy and are seen as proof that the classification of cryptocurrencies as securities is also controversial within the SEC. They refer to an often-cited “infamous” speech by former SEC Treasury Director William Hinman in which he did not classify Ethereum as a security. In his view, a digital asset that is “sufficiently decentralized” cannot be considered a security. A publication of the Hinman documents is expected for June 13, a verdict in the Ripple trial at the end of June.
What impact would an SEC ruling have on Ripple?
According to investing.com, Brad Garlinghouse is said to have announced several times that his company would leave the USA if Ripple lost the lawsuit. Garlinghouse kept saying that he saw Ripple’s growth opportunities worldwide. The hiring figures – almost half of the new employees will be hired outside the USA – also show that Ripple is also looking for growth opportunities outside of the USA. However, when asked by a cash.ch journalist whether Ripple Labs was planning to withdraw from the USA, Garlinghouse emphasized that Ripple is a global company headquartered in San Francisco.
Attorney Jeremy Hogan, who regularly shares his views on the Ripple trial on Twitter, is certain that the market for XPR would collapse by a quarter if the court followed the SEC.
Playing devil’s advocate: Anyone know what REALISTICALLY happens if Judge Torres actually deems $XRP to be a security? @bgarlinghouse already said they’d move abroad. So what would be the scenario for $XRP holders? @JohnEDeaton1 @attorneyjeremy1 @FilanLaw @MoonLamboio
– Michelle Nightengale 🇺🇸 (@BoostBizOnline) January 8, 2023
Encouraged by such a ruling, the US Securities and Exchange Commission could take further action against the crypto industry and target Ethereum next, according to investing.com, Fox Business journalist Charles Gasparin assesses the situation.
What’s next for XRP 2023?
According to CoinMarketCap, the cryptocurrency XRP is currently the sixth largest cryptocurrency with a market capitalization of around $25.366 billion and a price of $0.488 (as of May 29, 2023). Years of litigation and the crypto downturn have weighed heavily on Ripple in recent years.
Should Ripple Labs win the process in the USA, XRP could build on the successes of the past – because at the beginning of 2018 the cryptocurrency was still traded in second place by market capitalization. According to BTC-ECHO, experts assume that the Ripple price could rise to US$ 1.00, possibly even to US$ 1.30, should the verdict be in favor of the cryptocurrency. However, should the court follow the SEC, it would not only have negative consequences for XRP, but for all altcoins. The XRP price then threatens to fall to US$ 0.22, in extreme cases even to US$ 0.15.
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