In this photo illustration, the digital cryptocurrency Ripple is displayed in Paris, France, on January 30, 2018.
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Blockchain startup Ripple believes U.S. banks and other financial institutions will start showing interest in adopting its technology Ripple Cryptocurrencies are gaining wider use in cross-border payments after a landmark ruling determined that tokens themselves are not necessarily securities.
Ripple general counsel Stu Alderoty told CNBC in an interview that the San Francisco-based company expects to begin talks with U.S. financial firms in the third quarter about using its On-Demand Liquidity (ODL) product, which uses XRP transfer. last week.
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Last week, a judge in New York delivered a landmark ruling against Ripple, ruling that XRP itself “is not necessarily a security on its face,” refuting in part the SEC’s charges against the company.
Ripple has been battling the SEC for the past three years, alleging that the agency accused Ripple and two of its executives of conducting an illegal offering worth $1.3 billion through the sale of XRP. Ripple disputes these claims, insisting that XRP cannot be considered a security, but more akin to a commodity.
Ripple’s business suffered as a result, and the company lost at least one customer and investor. MoneyGram, the US remittance giant, Terminated partnership with Ripple in March 2021.
Meanwhile, U.K. investor Tetragon, which previously backed Ripple, sold its stake back to Ripple after unsuccessfully trying to sue the company for cash.
Asked whether the ruling meant Bank of America would return to Ripple for its ODL product, Alderoty said: “I think the answer is yes.”
Ripple also uses blockchain in its business to send messages between banks, kind of like a blockchain-based Swift alternative.
“I think we hope that this decision will give financial institution customers or potential customers some peace of mind that they can at least come in and start discussing the issues they’re having with their business and the realities of moving value across borders without incurring undue fees ,” Alderrotti told CNBC on Friday.
He added: “Hopefully there will be a lot of conversations with customers in the U.S. this quarter, and hopefully some of those conversations will actually translate into real business.”
The majority of Ripple’s business now comes from outside the U.S. Alderoty previously told CNBC that “(Ripple’s) customers and revenues come from outside the U.S., although we still have a lot of employees in the U.S.,” he added.
Ripple has more than 750 employees worldwide, about half of them in the United States
XRP is the cryptocurrency Ripple uses to move money across borders. It is the fifth largest cryptocurrency in circulation with a market cap of $37.8 billion.
The company uses the token as a “bridge” currency between transfers from one fiat currency to another (e.g., U.S. dollars to Mexican pesos) to solve the problem of pre-funded accounts on the other side of the transfer waiting to be transferred. pending funds.
Ripple says XRP can move funds in less than a second.
Still, the ruling does not represent an outright victory for Ripple. While the judges said XRP was not a security, they also said that certain sales of the token did qualify as securities transactions.
For example, the judge said that some $728.9 million in XRP sold to institutions the company worked with did qualify as securities, noting that there was a common enterprise, the expectation of profits.
Alderoty acknowledged that this is not exactly a victory for Ripple, and that the company will study the decision in due course to see how it affects its business.
“She (Judge Analisa Torres) found — although we disagreed with her — that our previous direct sales to institutional buyers were in the nature of securities and should be registered,” he said.
He said Ripple’s business would not be affected by the ruling because its customers are primarily located outside the United States.
“We’re going to look at what the judge decides, we’re going to look at what customers want from the market and see if there’s something here that fits the four corners that the judge found on the institutional side,” he said.