Ripple, the company behind the XRP token, could move to the UK because of issues with US regulations. According to the company’s CEO, Brad Garlinghouse, the UK’s FCA does not consider XRP to be a security. It is one of the main areas of contention with US regulators. Other nations that Ripple could relocate to are Japan, Singapore, and the UAE. With PayPal recently launching crypto support that ignores XRP, why is this a perfect reason that Ripple is looking elsewhere?
Issues With US Regulators
Ripple, a company valued at $10 billion, is unhappy with the current US regulations. During a recent interview, Brad Garlinghouse, the CEO, said that he recently visited London. He claimed that in the UK, Ripple is not considered a security. He noted that other regulators globally had given the company similar assurances.
Garlinghouse commended the UK’s FCA for providing clear taxonomy for digital assets. He said that the clarity they provided made it advantageous for Ripple to set up its operations in the country. Besides the UK, other nations that were on the list for Ripple’s new home were the UAE, Singapore, and Japan.
Garlinghouse believes that the US is out of sync with other G20 nations when it comes to regulating the crypto sector. Chris Larsen, Ripple’s executive chairman, was the first to reveal the intentions for Ripple to move out of the US during an interview at the start of October 2020.
Ripple’s Legal Woes In The US
Ripple has been engaged in a protracted legal battle with investors, who claim the company sold them unregistered securities. The investors also accuse Ripple of making misleading statements about XRP. Ripple has vehemently pushed back against these allegations.
Recently, the SEC declared that crypto coins such as Ethereum and Bitcoin were not securities and should not be regulated like bonds and stocks. However, the status of Ripple has not been cleared up. If Ripple is classified as a security, it would introduce constrictive rules for XRP. Such a classification could have a huge impact on Ripple. While Ripple claims that it does not control XRP, it owns 55 billion of the 100 billion XRP tokens created. Ripple even makes revenue by selling some of its XRP every quarter.
PayPal Crypto Is A Perfect Example
PayPal’s announcement last week is essentially introducing 200M+ users to digital currencies in the form of Bitcoin, Ethereum, Bitcoin Cash and Litecoin. Many investors across the industry were upset to see that PayPal was not incorporating XRP. With XRP being the 4th largest cryptocurrency by market cap and arguably having a perfect infrastructure for digital payments, it is becoming evident that regulatory uncertainty is the driver here.
For whatever reason, the courts in the United States can not seem to close the books on whether or not XRP is a security. With these allegations going on for years, it is hard to believe that a compliance team at a company like PayPal is going to ignore what is going on beneath the surface. If PayPal added XRP and then XRP was labeled a security, all of a sudden you have millions of users transacting unregistered securities globally through PayPal. The risk vs reward for PayPal is not there.
This was a perfect example why Ripple has been looking to relocate. The company is in a position to disrupt the payment markets, but the regulatory landscape in the United States right now is making it fundamentally impossible.
How Does XRP Work?
XRP is the fourth-largest crypto coin by market cap. According to Ripple, the main use of XRP is as a bridge currency for making international remittances. The main benefit of using XRP is that it lowers costs and increases the speed of transactions. Thus far, Ripple has partnered with various banks globally, including the largest commercial bank in Pakistan.
Ripple has created an interbank messaging platform that works in the same way as SWIFT. However, their platform relied on the blockchain. According to the Ripple CEO, dozens of banks could start using its crypto product, which is now called “on-demand liquidity. However, it has not yet been able to convince large banks to start using their XRP-based products. However, Ripple has won over two money transfer services, MoneyGram and Azimo.
The Ripple CEO believes the low uptake of its XRP-based services is the lack of legal clarity for XRP. As a result, most banks are not willing to take risks in the highly regulated banking sector.
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