In a recent newsletter, Fortune Crypto Editor Jeff John Roberts asserted that Ripple has finally found a long-term value proposition for the company and XRP, the native token of the XRP Ledger.
In the newsletter titled “Ripple and XRP may finally be for real,” Roberts reveals that he has always been skeptical of the value proposition of the cryptocurrency until he met with Ripple President Monica Long this week. Notably, the “Kings of Crypto: Coinbase and the Next Generation Finance” author now believes Ripple and XRP have found their niche with Ripple’s On-Demand Liquidity (ODL) product.
As highlighted by Roberts and previously reported by The Crypto Basic, the ODL product has grown rapidly in the last two years from just three countries in 2020 to 40 payout markets today, representing nearly 90% of the foreign exchange market. Roberts disclosed that Long explained that Ripple achieved this growth by focusing on partnerships with small and medium-sized banks that appreciated the lower transaction costs.
For context, Ripple’s ODL utilizes XRP as a bridge currency to allow for near-instant cross-border payments at low cost. Consequently, the author expressed the belief that with this model, the company may be positioned to succeed regardless of the outcome of its legal battle with the United States Securities and Exchange Commission (SEC).
“All of this is to say that Ripple, more than ever before, has figured out a long-term value proposition for both the company and XRP—and that it may be poised to succeed regardless of how its big court case turns out,” Roberts surmised.
Recall that the blockchain payments company remains locked in a legal battle with the SEC that has spanned over two years. The SEC claims that Ripple’s sales of XRP to fund its business violate securities law, arguing that XRP is an unregistered security.
As reported by The Crypto Basic yesterday, Long recently expressed that she is confident of a positive outcome in the case. Pundits have predicted that a ruling could come between now and the middle of April.
Okoya David Kio is a crypto enthusiast passionate about understanding what makes the nascent market tick. When he’s not pondering about cryptocurrencies, you might find him in a BP debate room trying to proffer solutions to age-old societal problems.
Ripple CEO Brad Garlinghouse explains a key reason he wanted to participate in the World Economic Forum in Switzerland. Brad Garlinghouse, the CEO of financial technology company Ripple Labs, argued on Tuesday that the whole cryptocurrency industry “needs to be more transparent.”
Speaking with “Mornings with Maria” from the World Economic Forum in Switzerland, Garlinghouse discussed regulation for the industry, noting that he traveled to Davos for the conference to engage with other CEOs and finance ministers from around the world “to talk about how these technologies can actually solve real world problems, and reduce costs and improve efficiency.”Garlinghouse also addressed volatility in the crypto market on Tuesday.
“There’s no question that regulation around crypto is still trying to find solid footing and finding the right posture for the United States,” Garlinghouse said before arguing that “the United States has really been behind other G-20 of markets,” including the U.K., Switzerland and Singapore.
He said that those markets “have led in establishing a framework that works for investors as well as entrepreneurs who are taking advantage of the new technologies and building the next generations of Google and Facebook.”
EXCHANGE TRADED CONCEPTS TRUST BITWISE CRYPTO INNOVATORS E
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Along with the stock market, bitcoin has experienced a lot of volatility recently. Two weeks ago, bitcoin plunged to the $25,000 level, its lowest since December 2020, then bounced back over $30,000, according to CoinDesk. As of Tuesday morning, the crypto was trading around the $29,000 level, down from its all-time high of over $68,000 reached in November 2021.
The crypto is down more than 36% year-to-date.“There’s no question there’s been a lot of turbulence in the crypto market,” Garlinghouse said, noting that “if you zoom out, though, over the last two years, you have to remember that bitcoin was at about $8,000 two years ago. Today it’s around $30,000.”
Brad Garlinghouse, the CEO of financial technology company Ripple Labs, discussed regulation and volatility in the cryptocurrency markets from the World Economic Forum in Davos, Switzerland. “This is a new market,” he continued. “There’s certainly been a lot of excitement about what’s going on in the market [and] sometimes that excitement gets ahead of the reality.”
“We’ve been focused on how do we use technologies to solve real problems for customers and those are the kind of solutions that will scale regardless of the turbulence and volatility of the market,” he went on to argue.
The expectation now is that the Fed will take aggressive action to try and curb inflation, which remains near 40-year highs, according to the data for April released earlier this month, which has reduced investor appetite to hold assets perceived as higher risk.
Adding to more fears of volatility in the crypto market was the decoupling of the TerraUSD, a stablecoin whose value was tied to $1, the Wall Street Journal reported. The world’s largest stablecoin by market cap, tether, also briefly edged down from its $1 peg. Garlinghouse pointed out on Tuesday that “stablecoins have been in the news because that was one of the catalysts that really drove the market a couple of weeks ago.”
Stablecoins are digital currencies with values that are pegged to traditional assets, like the dollar, another currency or gold. Its correspondence with the dollar is what, in theory, makes it stable. However, volatility in the crypto market last week challenged that presumption.
Brad Garlinghouse, the CEO of financial technology company Ripple Labs, discusses the turbulance in the crypto market from the World Economic Forum in Switzerland. “I think now more than ever the transparency that companies like Ripple have championed across the crypto industry is critical,” Garlinghouse told host Maria Bartiromo.
“That transparency for tether I think is to really make sure the people participating feel, buy and have access to whatever financial information they need to feel comfortable that it is in fact dollar-backed.”
U.S. Treasury Secretary Janet Yellen told a House committee hearing earlier this month that the sharp drop in crypto markets highlighted the need for additional federal regulation to respond to the wave of speculative investment in the currency whose secrecy is a major part of its attraction. In addition, a top official at the SEC indicated that tighter rules around crypto stablecoins could be drawing closer, Reuters reported.
The Securities and Exchange Commission has charged cryptocurrency pioneer Ripple Labs, the firm that owns a majority of the world’s third-largest cryptocurrency, for allegedly raising $1.3 billion in an offering of unregistered “digital asset securities”–a huge sign U.S. regulators could ramp up oversight of the cryptocurrency space as the market surges to new highs.
According to the SEC’s complaint, Ripple, its cofounder Christian Larsen and CEO Bradley Garlinghouse raised capital to finance the firm’s business through an unregistered public offering of XRP tokens beginning in 2013.
The complaint, filed in Manhattan’s federal district court, also alleges that Larsen and Garlinghouse carried out personal unregistered sales of XRP totaling roughly $600 million.
As of 3 p.m. EST, the value of the XRP token had plunged roughly 12% over the last 24 hours, according to crypto data firm CoinMarketCap, wiping out more than $2 billion from the cryptocurrency’s market cap.
“It’s not just Grinch-worthy, it’s shocking,” Garlinghouse told Fortune when he warned of the impending lawsuit on Monday evening, later tweeting that Ripple, a San Francisco-based firm last valued at $10 billion in 2019, “is ready to fight” the suit. “It’s an attack on the entire crypto industry and American innovation.”
The SEC has largely cracked down on crowdfunded token sales, commonly referred to as initial coin offerings, but XRP is easily the largest cryptocurrency targeted by the SEC as a security; officials in 2018 declared ether and bitcoin were currencies and not securities because of their decentralized nature.
Crucial Quote
“We allege that Ripple, Larsen and Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which deprived potential purchasers of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system,” said Stephanie Avakian, director of the SEC’s enforcement division on Tuesday.
Big Number
$653 billion. That’s the current market value of all the cryptocurrencies across the world, more than tripling this year alone, according to CoinMarketCap. At its peak in January 2018, the market was valued at more than $800 billion. XRP’s current market cap of $21.6 billion is bested only by ether ($71 billion) and bitcoin ($435 billion).
Key Background
Heightened regulatory scrutiny from nations such as South Korea triggered a near-85% crash in cryptocurrency prices in 2018, but the United States has been slow to issue broad-based regulation. Among the most vocal U.S. regulatory agencies when it comes to cryptocurrency, the SEC spent months drafting guidance it released in April 2019 about when and how cryptocurrencies may be classified as securities, but it’s been relatively quiet on the front ever since.
The suit against Ripple, however, could mean that’s set to change as the cryptocurrency market soars toward new highs during the pandemic. “There is more and more interest from a wide spectrum of people, both inside the crypto space as well as inside the traditional financial institutions who are asking us for guidance,” an SEC Commissioner told CoinDesk in October. “I think we’re going to be forced to confront that more and more in the coming years.”
What To Watch For
Competition–from the government. Though it has not committed to the idea, the Federal Reserve is exploring the possibility of debuting its own central bank digital currency, Goldman Sachs said in a Sunday note. Officials have warmed up to the idea of a central bank token “largely out of concern that wide adoption of alternative digital currencies could endanger financial stability, U.S. financial intermediaries and the Fed’s ability to influence financial conditions,” Goldman analysts led by Jan Hatzius said.
Tangent
During the pandemic many investors have flocked to cryptocurrency–and namely bitcoin–as a hedge against longer-term inflation concerns, which have escalated in the face of increased government spending for coronavirus relief measures. In a report released Monday, digital asset management firm CoinShares said cumulative investments into cryptocurrency funds have totaled about $5 billion so far this year, eclipsing the approximately $1.4 billion plowed into the space through the end of last year.
Chief Critic
“Other major branches of the U.S. government, including the Justice Department and the Treasury Department’s FinCen, have already determined that XRP is a currency,” Ripple Counsel Michael Kellogg said in a statement to Forbes, arguing that the currency designation means XRP transactions fall outside the scope of federal securities laws. “This is not the first time the SEC has tried to go beyond its statutory authority. The courts have corrected it before and will do so again,” he added.
I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at jponciano@forbes.com.
Bitcoin stabilized following its near-20% crash at the beginning of September, and the market structure remains more bullish than it was when it plummeted 50% in March. Large whale order have set a possible floor at about $8,800, though the macro environment is far from certain, and bitcoin may still be partially dependent on the whims of the stock market.
Ether underperformed bitcoin this week, in part because of a SushiSwap crash that magnified the fragility of the DeFi bubble, which has boosted ether in recent months. SushiSwap, founded as a token to bootstrap liquidity on the uniswap decentralized exchange, lost more than 70% of its value after its anonymous creator Chef Nomi liquidated his wallet, netting nearly $12.5 million.
The ripple effects pushed ether down 30% last weekend, though it recovered those losses during the week. Chef Nomi transferred the keys to SushiSwap to crypto executive Sam Bankman-Fried, who was optimistic about DeFi’s future, but added that “you can imagine a scenario where it could flame out back into hibernation for a while.”
DEFI BUG NETS 100,000% PROFIT
Another DeFi cautionary tale this week came via a glitch in Soft Yearn Finance, a project meant to be artificially pegged to the Yearn Finance token. It overrides the token holder balances every 24 hours in a process called a rebase to return to its pegged price.
But when it was listed on the uniswap exchange, it spiked to $160 and then immediately plummeted back to less than a penny, but not before an investor initiated a sell transaction while the protocol was mishandling the rebase. The result: that investor turned $200 into $250,000 in a matter of minutes at the expense of misguided buyers.
MAJOR MERGER
Digital Currency Group, the parent company of asset manager Grayscale and media outlet CoinDesk, announced Wednesday that it acquired London-based crypto exchange Luno for an undisclosed amount. Luno CEO Marcus Swanepoel said his exchange, which has 400 employees and 5 million users, is poised to expand in the Middle East and South America.
PROGRESS IN CONGRESS
Part of the Digital Taxonomy Act made it out of committee in the House of Representatives and will be considered by the full chamber, marking the farthest a bill addressing regulation for blockchain tokens has gotten in the 116th Congress. The portion of the bill, aimed at preventing crypto scams and crime, as well as part of the Blockchain Innovation Act were incorporated into the Energy and Commerce Committee’s Consumer Protection Safety Act.
The American Compete Act, which calls for the Department of Commerce and the Federal Trade Commission to conduct a study examining blockchain development to stay competitive with China, also made it out of the marathon committee session.
ENTERPRISE
UK-based crypto startup Crypterium, run by former visa executive Steven Parker, recently launched a Visa V-0.4% card for its European customers and is now eyeing a partnership with PayPal and support for Apple Pay. Parker insists that the blockchain industry should be “happy to be regulated,” saying that more regulation means “traditional players such as Visa and banks are happy to work with us.”
ELSEWHERE
How China Is Closing In on Its Own Digital Currency [Bloomberg]
Hackers Are Trying To Break Into This Bitcoin Wallet Holding $690 Million [Vice]
How bitcoin met the real world in Africa [NBC News]
‘High’ Severity Bug in Bitcoin Software Revealed 2 Years After Fix [CoinDesk]Follow me on Twitter. Send me a secure tip. Crypto ConfidentialCovering the most important news in crypto and blockchain. Sign up to get Crypto Confidential delivered to your inbox every Saturday: https://bit.ly/3hgk9xu
Ripple has unlocked 1 billion XRP from escrow, worth about $442 million at time of publishing.
The San Francisco startup will sell a portion of the funds to crypto exchanges and institutional participants and return the rest to escrow at the end of the month.
Source: Bithomp
Ripple, which owns more than half of the total supply of XRP, does not reveal the buyers. However, crypto whale watchers are constantly monitoring XRP movements from Ripple’s over-the-counter (OTC) wallets to unknown wallets, which indicate sales of XRP.
15,000,000 #XRP (6,228,576 USD) transferred from Ripple OTC Distribution wallet to unknown wallet
In a recent newsletter, Fortune Crypto Editor Jeff John Roberts asserted that Ripple has finally found a long-term value proposition for the company and XRP, the native token of the XRP Ledger.
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