Ripple hopes judge’s ruling in SEC case will lead US banks to use XRP

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Ripple is convinced that US banks will start wanting to use its XRP cryptocurrency for cross-border transactions after a judge gave the company a partial victory in its fight against the SEC, General Counsel Stu Alderoty told CNBC. A judge has ruled that XRP itself is not necessarily a cryptocurrency, in a development with major implications for the digital asset industry. It was not a total victory for Ripple, but the judge also ruled that sales of XRP by Ripple to institutional buyers count as unrecorded 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 across 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, in itself, necessarily a security.

The San Francisco-based company plans to begin discussions with U.S. financial firms about using its on-demand liquidity (ODL) product, which uses XRP for money transfers, in the third quarter, Stu said. Alderoty, Ripple’s general counsel, to CNBC in an interview. last week.

Last week, a New York judge issued a landmark ruling for Ripple determining that XRP itself is “not necessarily a prima facie security”, partially disputing claims by the US Securities and Exchange Commission. United against society.

Ripple has been fighting the SEC for three years following allegations by the agency that Ripple and two of its executives conducted an illegal bid worth $1.3 billion through the sale of XRP. Ripple disputed the claims, insisting that XRP cannot be considered a security and is more like a commodity.

Ripple’s business suffered as the company lost at least one customer and one investor. MoneyGram, the American money transfer giant, abandoned its partnership with Ripple in March 2021.

Meanwhile, Tetragon, a UK-based investor who previously backed Ripple, sold its stake to Ripple after unsuccessfully trying to sue the company to buy back its money.

When asked if the decision meant that US banks would switch back to Ripple to use its ODL product, Alderoty said, “I think the answer to that question is yes.”

Ripple also uses blockchain in its business to send messages between banks, much like a blockchain-based alternative to Swift.

“I think we’re hoping this decision will reassure financial institution customers or potential customers to at least come in and start discussing the issues they’re having in their business, the real issues in terms of transferring value across borders. . without incurring obscene fees,” Alderoty told CNBC on Friday.

“Hopefully this quarter will generate many conversations in the US with customers, and hopefully some of those conversations will turn into real business,” he added.

Ripple now sources mostly from outside the US, with Alderoty previously telling CNBC that “[Ripple]its customers and revenue are all generated outside of the United States, although we still have a lot of employees in the United States,” he added.

Ripple has over 750 employees worldwide, around half of which are based in the US

XRP is a cryptocurrency that Ripple uses to transfer 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 the money to arrive. Processing.

Ripple says XRP can enable money movements in a fraction of a second.

Still, the decision did not represent a total victory for Ripple. Although the judge said that XRP was not a security, he also said that some sales of the token were considered securities transactions.

For example, about $728.9 million in sales of XRP to institutions the company worked with were considered securities, the judge said, stating that there was a common enterprise, an expectation of profit.

Alderoty admitted that it was not a complete victory for Ripple and that the company would review the decision in due course to see how it affects its business.

“She [Judge Analisa Torres] We found, although we disagreed with it, that our prior sales directly to institutional buyers had the attributes of a title and should have been registered,” he said.

He said Ripple’s business as it stands would not be affected by this element of the decision, as its customers are primarily located outside of the United States.

“We will study the judge’s decision, we will look at the needs of our clients to look at the market and see if there is a situation here that is consistent with all four corners of what the judge found regarding institutions,” he said.

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