This photo sits the Ripple cryptocurrency “altcoin” arranged for a photo on April 25, 2018 in London, England.
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US-based crypto firm Ripple no longer derives most of its income from America and is looking to expand its reach in Europe, its top attorney said.
In an interview with CNBC earlier this week, Ripple General Counsel Stuart Alderoty said that “Ripple actually operates outside the US today” due to the fallout from its extensive legal battle with the Securities and Exchange Commission.
“Essentially its customers and revenue are all generated outside of the US, although we still have many employees in the US,” he added.
At the same time, Ripple is expanding its presence in Europe.
The startup currently has two employees on site in the Republic of Ireland. Alderoty is applying to the Central Bank of Ireland for a VASP (Virtual Asset Service Provider) license so it can “pass” its services across the European Union through a resident entity, Alderoty told CNBC.
Ripple also plans to apply for an e-money license in Ireland “soon”. His commitment to investing in Europe comes despite a deep downturn in crypto markets dubbed “crypto winter.”
The Central Bank of Ireland previously granted a VASP license to crypto exchange Gemini.
Ripple, which helps financial institutions move money around the world using blockchain technology, has over 750 employees worldwide, about half of whom are based in the United States. About 60 work from his London office, which Alderoty visited this week during a trip to the UK for its annual Swell event.
SEC ruling expected in 2023
In 2020, the US Securities and Exchange Commission launched a lawsuit against Ripple alleging that the company and its executives illegally sold XRP, a cryptocurrency that its founders created in 2012, to investors without first listing it as a security to register.
Ripple denies the claim, stating that 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 in the first half of 2023. Final legal briefs are due by November. 30, which allows a judge to either make a decision or refer it to a jury if he finds there are disputed facts.
“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 helped his case. In the speech, Hinman says that the sale of ethera competing token, “are not securities transactions”.
Despite its tense dispute with the SEC, Ripple is still “working very closely with policymakers in the US,” Alderoty said.
XRP was once the third largest cryptocurrency, with a market value of $120 billion in early 2018. Since then, however, it has fallen sharply due to the US regulatory review and a broader downturn Bitcoin and other digital currencies.
Last week, the shock collapse of Sam Bankman-Fried’s crypto exchange FTX sent cryptocurrencies into a tailspin. Bankman-Fried’s investment firm allegedly used FTX client funds to make risky trades, CNBC previously reported. The company faced a liquidity crisis as customers demanded withdrawals and rival exchange Binance abandoned its non-binding agreement to buy the company.
Bankman-Fried said he got “cocky” and “careless” as he turned FTX into a $32 billion juggernaut. He said that to the best of his knowledge, he assumed FTX had leveraged around $5 billion when in reality it was around $13 billion.
Alderoty said FTX’s bankruptcy was “a call to action for responsible economic hubs to work to make it right.”
On Wednesday, Ripple CEO Brad Garlinghouse told CNBC that the idea of crypto being unregulated is “overhyped.” But, he added, “Transparency breeds trust.”
“Crypto has never been all sunshine and roses and as an industry it needs to mature,” Garlinghouse said on CNBC’s Squawk Box Europe.
Ripple is unlikely to be referring to the FTX collapse and how regulators handled it in his case, Alderoty added.
Part of the confusion surrounding XRP stems from the fact that the company owns part of the token. Ripple previously held up to 60% of the XRP tokens in circulation. It has since reduced that amount to under half, or 49%, according to Alderoty.
Ripple generates part of its revenue by releasing its supply of XRP to the open market. For the past three years, it has only sold XRP to enterprise customers and not retailers, Alderoty said.
As a private company, Ripple does not publicly disclose its earnings. That year, the company processed $10 billion worth of cross-border transactions with payment processors and other financial institutions XRPa token with which it is closely associated.
Ripple, the company, was last valued by investors at $15 billion. XRP has a market cap of $19 billion, according to CoinMarketCap data.
Ripple’s European expansion trajectory comes in anticipation of the EU’s MiCA crypto regulations coming into effect in the coming years. MiCA is trying to equalize the rules for crypto assets in the 27-strong block. It was passed by EU legislators earlier this year.
The EU has said it may yet have to develop 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,” said Alderoty.
Great Britain is also in focus. Ripple on Monday released a set of guidelines outlining how it thinks the UK should regulate crypto.
A bill is making its way through the UK Parliament that would give the Financial Regulator greater oversight over crypto, but this has yet to come into force.
Crypto executives hope Prime Minister Rishi Sunak, who is a fan of crypto and the so-called “Web3”, will provide regulatory clarity to make the country a more attractive place to start a business.