In this photo illustration the wavy cryptocurrency ‘altcoin’ stands ready for a photograph on April 25, 2018 in London, England.
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US crypto company Ripple no longer gets most of its revenue from America and is looking to expand its reach in Europe, its top lawyer said.
In an interview with CNBC earlier this week, Ripple General Counsel Stuart Alderoty said that “Ripple is effectively operating out of the US” today due to the fallout from its extensive legal battle with the Commission on Securities and Stock Exchange.
“Essentially, their customers and their revenue are directed outside the US, although we still have a lot of employees in the US,” he added.
At the same time, Ripple is expanding its presence in Europe.
The startup currently has two employees on the ground in the Republic of Ireland. It is seeking a virtual asset service provider (VASP) license from the Irish central bank so it can “passport” its services across the European Union through an entity based there, Alderoty told CNBC.
Ripple also plans to apply for an e-money license in Ireland “shortly”. Its commitment to invest in Europe comes despite a deep slump in crypto markets that has been dubbed “crypto winter.”
The Irish central bank previously issued a VASP license for the Gemini crypto exchange.
Ripple, which helps financial institutions move money around the world using blockchain technology, has more than 750 employees worldwide, with about half of them in the United States. They have about 60 in their London office, which Alderoty visited this week during a trip to the United States. UK for their annual Swell event.
SEC ruling expected in 2023
In 2020, the US Securities and Exchange Commission filed a lawsuit against Ripple alleging that the company and its executives illegally sold XRP, a cryptocurrency created by its founders in 2012, to investors without first registering it as a value.
Ripple disputes the claim, saying the token should not be considered an investment contract and is used in its business to facilitate cross-border transactions between banks and other financial institutions.
Alderoty said he expects a decision on the case to come in the first half of 2023. Final legal briefs are due in November. 30, after which a judge may issue a decision or remand for a jury trial if he finds there are issues of disputed fact.
“In our case we are at the beginning of the end of the process,” said Alderoty.
As part of the proceedings, Ripple fought to obtain documents related to a June 2018 speech by former SEC official Bill Hinman, which it says has helped its case. In the speech, Hinman says that sales of ethera rival witness, “they are not securities transactions.”
Despite its tense dispute with the SEC, Ripple is still “working very closely with US policymakers,” Alderoty said.
XRP was once the third largest cryptocurrency, with a market cap of $120 billion in early 2018. However, it has fallen sharply since then, amid US regulatory scrutiny and a wider fall of bitcoin and other digital currencies.
Last week, the shock collapse of Sam Bankman-Fried’s FTX cryptocurrency exchange sent cryptocurrencies lower. Bankman-Fried’s investment firm allegedly used funds from FTX clients to make risky trades, CNBC previously reported. The company ran into a liquidity crisis when customers demanded withdrawals and rival exchange Binance scrapped its non-binding agreement to buy the company.
Bankman-Fried has said he got “overconfident” and “careless” as he built FTX into a $32 billion behemoth. He said that based on what he knew, he thought FTX had built up about $5 billion in leverage, when it was actually about $13 billion.
Alderoty said the FTX bankruptcy was “a call to action for responsible economic centers to work to get it right.”
On Wednesday, Ripple CEO Brad Garlinghouse told CNBC that the idea that crypto is unregulated is “overblown.” But, he added, “transparency breeds trust.”
“Crypto has never been all roses and as an industry it needs to mature,” Garlinghouse told CNBC’s “Squawk Box Europe.”
Ripple is unlikely to refer to the FTX collapse and how it was handled by regulators in its case, Alderoty added.
Part of the confusion surrounding XRP stems from the company’s partial ownership of the token. Ripple previously held up to 60% of the XRP tokens in circulation. It has since cut that amount by less than half, or 49%, according to Alderoty.
Ripple generates a portion of its sales by releasing its supply of XRP to the open market. For the past three years, it has only sold XRP to business customers rather than retail traders, Alderoty said.
As a private company, Ripple does not disclose its revenue publicly. This year, the company processed $10 billion in cross-border transactions with payment providers and other financial institutions using XRPa witness with whom he is closely associated.
Ripple, the company, was last valued by investors at $15 billion. XRP has a market cap of $19 billion, according to data from CoinMarketCap.
European expansion
Ripple’s European expansion drive is anticipated as the EU’s MiCA crypto regulations come into effect in the coming years. MiCA seeks to align rules on crypto assets in the 27-member bloc. It was approved by EU lawmakers earlier this year.
The EU has said it would still need to create a separate regime for non-fungible tokens, or NFTs, a specific type of digital asset that tracks ownership of art and other assets on the blockchain.
“I think MiCA is a very good start,” Alderoty said.
The UK is also a priority. Ripple published a set of guidelines on Monday outlining how it believes Britain should regulate crypto.
A bill that would give the financial regulator greater oversight of crypto is making its way through the UK Parliament, but this has yet to become law.
Crypto executives hope Prime Minister Rishi Sunak, who is a fan of crypto and the so-called “Web3,” will issue regulatory clarity to make the country a more attractive place for companies to set up shop.
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