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Ripple CEO on SEC Lawsuit, IPO, Stablecoins, Trump Administration
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- 00:00This has been a long battle. How much certainty does this provide? Is the entire case over? So this provides a lot of certainty for Ripple for frankly, me personally, because the SEC had sued me. The SEC has abandoned their appeal. And so we that they filed suit in December of 2020. We won on the key parts of the case in the summer of 23. Judge Torres made a ruling that XRP in and of itself was not a security. That’s almost verbatim quote. The S.E.C. filed an appeal about eight months ago, and what they’ve now agreed is that they’re going to drop that appeal. We still have a cross appeal pending, and so we go from being defendant really to plaintiff. So we now are in the driver’s seat to determine how we want to proceed. Are you dropping it? We’re going to see we we it feels a lot better to be on the offense than the defense. You know, for years we spent over $150 million defending that case, not just for Ripple, but for the whole industry. I think it was really important that this SEC, the Gensler SEC, was really trying to bully and continue lawfare. Filing lawsuits and lawsuits and lawsuits against crypto companies. That’s over now. And I think that’s great for the US crypto industry and frankly great for crypto at large. I mean, to that end, if you’re looking at in the US, you see why not drop the case at this point? Why not clear the pay? Why not clear the water? Well, that certainly is an option. I mean, again, it’s clear the SEC has said, you know, they I think in retrospect never would have brought this case. The the judge did rule in certain instances back in 2015 and 2016, some XRP sales that we sold to accredited investors, to institutions that those had constituted a security. And so there was a $125 million fine that’s sitting in escrow. We wouldn’t mind having that back. That’s on the table. And I think there’s some nuances to how this will play out. But it was important for us for really the whole XRP community, for them to know that the case is, for all intents purposes, the cases over the SEC’s no longer pursuing them. To that end, to your point here, the court decision had ordered you to pay a $125 million civil penalty for exactly what you’re talking about is that 125 million paid is what you’re saying. That’s still up? Yeah, well, it’s not a dispute. I mean, that’s sitting in an escrow and, you know, depending upon whether or not we decide to continue with our appeal, we could walk away and the whole thing can be done, done, done. On the other hand, when you have a case where there were no investor, no investor harm, no investors lost any money, you’re kind of like, wait, like, why are we here? And it really goes back to Gary Gensler fighting a fight that was about power grab, that was about overreach of the bureaucracy to try to take a new industry. That what we’re seeing now happening in Washington is smart legislation will come forward. You’re seeing that happen to stablecoins in real time. And I think you’ll have a market structure. Bill is what is described as to provide clarity and rules for the SEC and CFTC will look at the bigger picture. We’re going to have you for a little while this morning. But do you think that part of this means fighting it till the very end to make sure even that part of uncertainty around being sold to certain investors classifies as a security? Is that what you are fighting for ultimately at this point? Well, I mean, at this point, all we’re fighting for is do we want to fight to get $225 million back? We look, I’ll be honest, would I have walked away from that before they appealed before President Trump put Paul Atkins and Scott Bessant and David Sacks as critical, key very smart leaders in this industry to bring this industry back on shore. I would have walked away. Now you look at that and make this case in this S.E.C. never would have been brought. And so where we find ourselves is great. There’s a clear legal victory to say XRP is not a security that was good for the industry, but there’s pieces of it that we think can be kind of cleaned up. And the question is, do we want to fight that fight, or can we come to the agreement with the SEC to drop everything? The whole idea that this wouldn’t have been brought under this S.E.C., have you had that specific discussion with Paul Atkins and with David Sacks or Paul Atkins hasn’t yet been confirmed? You know, he’s a very knowledgeable guy about this industry and has been for a long time. But I’ve had conversations I won’t comment on specifics with certainly, you know, I think David Sacks would agree that this is a case that didn’t make a lot of sense in the beginning. Again, there was no investor harm. This was about Gary Gensler waging a war against this industry. You know, it’s interesting. I want to also point out that the affiliated token, of course, IT XRP has been up roughly 14% now, about 13% in the last 24 hours. You know, one thing a lot of people have looked at, we’re thinking a lot about how the administration is handling crypto assets, particularly outside of Bitcoin. Why do you think XRP wasn’t specifically named in the executive order for the digital Asset stockpile? Well, XRP was named by the President in Untruth Social. He posted something saying that there should be other tokens, that there’s going to be a Bitcoin strategic reserve. And then a crypto stockpile that would include things like access later. The executive order didn’t include it. Why was that? I don’t know what specifically was in the executive order. My understanding is there’s going to be a Bitcoin strategic reserve. There’ll be a crypto stockpile representing other cryptos, and I would expect that will include XRP. Look, at the end of the day, I think the stark contrast is in the Biden administration. We couldn’t get a meeting with people at the White House. Now we’re welcomed into the White House and that’s just a massive change. I think we want this industry to thrive in the United States. We want to push it offshore where you have fewer regulations. I think the reason I keep pushing you, too, is because I think now it’s widely accepted that this is a pro crypto administration. But the details, that is what’s causing an overhang, the uncertainty of the details. So to the extent you have confidence right about XRP being in that stockpile or otherwise getting more support for an ETF, yeah, for example, where does that confidence come from and what kind of timeline do you see it happening on? So I have immense confidence on the ETF. I think there’s 11 different filings pending with the SEC to launch ETFs from everybody from Bitwise to Franklin Templeton and a whole bunch of people in between. I think those will be live in the second half of this year. We have seen even outside the United States, you have live ETP and at a time when a lot of outflows are exiting, some of the crypto ETFs, you’re seeing inflows into XRP. And I think that’s because you had this false negative pressure from the SEC, this kind of, you know, a exhaustion is hand holding things down that’s now being released and that’s great for the market. It’s great for builders within the XRP ecosystem globally. One more on the stock. Yeah. How much XRP would be in it? Where does it come from? Well, my understanding when I read about the I mean, I think there are some questions and that, you know, the devil may be in the details as Treasury implements some of this. Absolutely details. But my understanding is that the stockpile would be represented by seized other cryptos other than Bitcoin. That then will be in that stockpile. So to the extent that various law enforcement agencies have seized cryptos, which would include XRP, that those would go into the stockpile in addition to the Bitcoin strategic reserve. That’s my understanding. We have been talking here about a big moment for you and for your company. Of course, a roll back really of the tensions that had been brewing with the FCC. And let’s talk about the next phase. One thing I’m really wondering about now that there’s more clarity for you is that it is an IPO, frankly, in your future. Now, it will talk so much about the potential for the XRP token to be wrapped in an ETF that is a method of listing. So is listing possible now for you for Ripple? Well, it’s certainly something that is possible. The United States SEC under Gensler was so hostile to this industry. I mean, ironically, they approved the S-1 from Coinbase and then sued them for doing the things they said they were doing. So this SEC, fortunately, is going to be, I think, very constructive and positive for this industry. So I think that’s available and the company is at a stage where we can consider that. That being said, it isn’t a huge priority. You know, I think most companies are going public. Raising capital is something that is high on their on their radar. You know, we have been in a very fortunate position to be able to grow the business organically. We’re also, frankly, more proactive in looking at acquisitions, that this is an industry that finally is going to be able to thrive in the United States, the largest economy in the world. And I think the industry is still underestimating the shift from the headwinds to the tailwinds That’s going to make a bigger difference if people think in finally, the U.S. market is really unlocked. So it sounds like what you’re saying acquisitions are almost more of a priority now than an IPO for you. So then what would you be looking for to buy and how big are you willing to go? Well, I’m not going to name names, but it will like Ripple. At its core is a blockchain infrastructure company. We sell our technologies to businesses, primarily financial institutions, and we’ll look at other things that are blockchain infrastructure companies. I think there will be consolidation this year. There’s a lot of excitement about some of the changes and think, you know, we will lean into that for sure. So when you think about what’s possible in terms of financial institutions, there’s been a lot of conversation about loosening of regulations and red tape when it comes to the financial industry and its interactions with the crypto community. What are you actually seeing happen? Are banks really warming up in a way that’s significant right now? I mean, I think unequivocally yes. I mean, just in the last few weeks, I have seen U.S. financial institutions go from being like, look, we’re just not going to touch it because we don’t want the extra scrutiny of the regulators, which, again, may or may not have even been legal, given these are legal businesses. But you have large banks who used to say negative things, now saying positive things. I think the two areas you’ll see the most activity in the short term. One is around custody. These are banks that want to be able to custody, particularly when you see real world assets being tokenized. You need to be able to safely manage and custody that for customers and potentially for the bank. And the second is around payments. I mean, the global payments infrastructure still remains very dated. You know, buyers are slow. I just had a wire. They’re sending over euros disappear for five days. You know, that’s surprising in a world of the Internet. So one part of that payments infrastructure that I’m watching really closely is, of course, stablecoins. There is starting to be more clarity in Washington and you’re seeing people starting to use stablecoins in really interesting ways. I think about Robinhood, for example, using Stablecoin in terms of facilitating 24 hour trading. What’s next? I mean, if you think about the next forefront of Stablecoins, now that the U.S. is getting toward clarity, what’s possible? Well, again, I think we’re underestimated how big that might get. You know, today that markets about $230 billion. I think some smart people think that may go up ten X in the next five years. I think that’s probably right. I mean, the two leading players and Tether as well as Usdc are both, I think, poised to do well in that market. Ripple launched our own stablecoin at the end of last year. That’s already ahead of our own internal forecasts in terms of where we are at this point in years still were small, but the goal is by the end of the year for RL USD Ripple stablecoin to be one of the top five in the market by the end of the year. And I think the whole market’s going to grow dramatically this year. So what does it take you to get there? Who are you pairing up with? Are you creating some financial partnerships in order to make our U.S. more of a household name? Yeah, for sure. I mean, even today we had more listings go live for all USD on some global crypto exchanges. You know, any time you do something new, it takes a minute for that kind of. If the pain of the ripple effect of seeing how that plays out. And so we’re seeing that happen in real time. So I’m really pleased. Again, as I said, we’re ahead of our Q1 forecasts of where we expected to be. So we feel really good about that progress. Given through what you have gone through with the SCC, I think one major question is how tokens list in the future? What do they mean? How are they classified now that you’re talking about many other say even private equity companies looking to tokenize their funds. Venture capital. As Cathie Wood told us yesterday, she’s considering that for her own fund. What does this mean? What are the rules of the road? Are people going to list and put the cart in front of the horse as they do? So? Yeah, well, look, I think tokenizing like what Cathie Wood’s talking about democratizing access to different investment vehicles, investing in different investment types is very compelling. Even, you know, imagine Shark Tank enabling the participation by different sharks. Like there’s some really interesting stuff you could do. Right now. Congress, it seems, is more focused on getting stablecoin legislation passed that went for markup last week. And I think you’ll see that potentially in front of the president in weeks. The other piece of legislation I think will move quickly after that is kind of the market structure. Bill, last summer for something called fit 21 passed. The House did not get through the Senate. I think that a market structure bill like that 21 will come before Congress, hopefully before the summer recess. We’ll see that pass. Also, you know, you think about how many exchanges are now looking to loosen their listing standards already on the heels of lighter oversight and the cart before the horse. Question, Do you think that people are getting a little ahead of themselves and listing things that shouldn’t be listed? Well, I don’t think about it as lighter regulation because frankly, I think the industry wants to be regulated. And what we’ve been saying for years as an industry is we just want clear regulation. We don’t want lawsuits just claiming one thing in the next week contradicting themselves, which is exactly what Gensler’s FCC was doing. So I think just the fact that we have an SEC who’s trying to work constructively instead of trying to sue more companies to actually work and codify and get legislation to provide that clarity. But again, if you don’t have that clarity, what you saw years ago was an ICO boom where tons of things that were raising money never worked out for the people that were buying the tokens or coins. Look, I agree. And I said then that I think it some of these ICOs were a lot more like IPO as they were securities. The problem is the SEC then kind of used that to just blanket and say I mean, well, Gensler said before he was SEC chair, he didn’t think they were securities and then after he became SEC chair is kind of his power grab. Gensler wanted everything under his jurisdiction. So I think I wish that ICO boom went away. And there’s lots of ways this government can regulate and manage fraud and manage criminal activity. And that did happen. People did go to jail. I have one more question for you about Ripple and XRP in particular on the supply and how it’s managed and the Unlocks. Is there anything you would do to change the amount of supply brought to market? Can you do that? How does that exactly work? Because there is a level of dilution for XRP when more supply is brought in on a regular basis. So this is one of the things I’m glad you asked, because there’s frankly misinformation, sometimes disinformation, people spreading falsehoods out there. The amount of XRP that was created in 2012 when it was first started, that blockchain was first started, it was 100 billion units. That can’t be increased. It’s slightly deflationary and now there’s about 99.9 billion units. Ripple owns about 42% of that supply we have had in for, I guess, eight years. We publish something called the XRP Markets Report, where we share how much we are introducing into the market because we want that to be predictable. And that has been the case for many years now. And so we will continue to make sure that’s very predictable. You know, at some point maybe we won’t be selling as much. We’ll see how that plays out in the future. But right now, frankly, we get criticized for owning too much and then we’re criticized for selling some. But we want to do that in a constructive way, which is what we’ve done for years.
