Ripple Optimistic That Judge’s Decision in SEC Case Would Encourage US Banks to Adopt XRP

Blockchain startup Ripple is confident that U.S. banks and financial institutions will show interest in adopting its cryptocurrency XRP for cross-border payments. This comes after a landmark ruling determined that XRP, in itself, is not necessarily a security.

The San Francisco-based company plans to initiate talks with American financial firms in the third quarter of this year about using its On-Demand Liquidity (ODL) product, which leverages XRP for money transfers, according to Stu Alderoty, Ripple’s general counsel, in an interview with CNBC.

Last week, a New York judge delivered a significant ruling stating that XRP is “not necessarily a security on its face,” challenging the U.S. Securities and Exchange Commission’s claims against Ripple. Ripple has been engaged in a legal battle with the SEC for the past three years over allegations of conducting an illegal offering of $1.3 billion worth of XRP. The company argues that XRP should be considered a commodity rather than a security.

As a consequence of the legal dispute, Ripple suffered a loss in business, with MoneyGram, a major U.S. money transfer company, ending its partnership with Ripple in March 2021. Additionally, Tetragon, a U.K.-based investor, sold its stake back to Ripple after an unsuccessful attempt to sue the company for cash redemption.

When asked if the ruling would lead American banks to return to Ripple and adopt its ODL product, Alderoty expressed optimism, stating, “I think the answer to that is yes.”

Ripple also utilizes blockchain technology to facilitate messaging between banks, serving as a blockchain-based alternative to Swift.

“We hope that this decision will provide financial institutions with the confidence to engage in conversations about the real-world problems they face in moving value across borders without incurring high fees,” Alderoty added.

Ripple currently conducts the majority of its business outside of the U.S., although it still employs a significant number of staff within the country.

Ripple has a global workforce of over 750 employees, approximately half of whom are based in the U.S.

XRP acts as a cryptocurrency for Ripple’s cross-border money transfers. It is currently the fifth-largest cryptocurrency with a market capitalization of $37.8 billion.

Ripple utilizes XRP as a “bridge” currency for transfers between different fiat currencies, resolving the issue of pre-funded accounts required on the receiving end of a transfer. The use of XRP enables swift money movements.

However, it’s important to note that the recent ruling did not represent a complete victory for Ripple. While the judge stated that XRP is not a security, they also acknowledged that some sales of the token could qualify as securities transactions.

Alderoty recognized that it was not a complete victory and mentioned that the company would analyze the decision’s impact on its business. He stated, “She found — although we had disagreed with her — that our earlier sales directly to institutional buyers had the attributes of a security and should have been registered.”

Ripple’s current business operations remain unaffected by this aspect of the ruling, as its primary clientele is located outside of the U.S. Alderoty affirmed that Ripple will study the decision, evaluate the needs of its clients and the market, and determine compliant solutions for institutional transactions.