Ripple’s CEO won’t apologize for taking on the SEC

Ripple just bought back a huge chunk of its shares this week, which CEO Brad Garlinghouse touted as a sign of the crypto company’s momentum.

But he also used the opportunity to hit back at the agency that the crypto powerhouse considers its nemesis: the SEC.

“Despite these crazy headwinds with the SEC — and frankly, losing some customers because of the SEC lawsuit — we grew very quickly, and we feel like we're starting 2022 in a great position of strength,” Garlinghouse told Protocol.

The company is embroiled in a lawsuit, filed in 2020, in which the agency accused Ripple of raising $1.3 billion in unregistered digital-asset securities by issuing XRP tokens. The SEC's key claim is that XRP is not a currency, but a security, and therefore subject to strict securities laws. Ripple has argued that XRP is a virtual currency, not an investment contract.

In an interview with Protocol, Garlinghouse discussed why the share buyback makes sense, the growing worries about another crypto winter and why the SEC and crypto critics are wrong to portray the industry as the “Wild West.”

This interview has been edited for brevity and clarity.

Why buy back shares?

A lot has changed in the crypto world in the last two years since we did this [funding round]. Overall asset values have grown from about $200 billion to about 8x that today. Ripple’s business has materially grown. So despite these crazy headwinds with the SEC — and frankly, losing some customers because of the SEC lawsuit — we grew very quickly, and we feel like we're starting 2022 in a great position of strength.

We have over a billion dollars of cash on the balance sheet today. We're super excited about where things are going. We had this opportunity to repurchase shares at a $15 billion valuation. We obviously thought that it was a good use of capital for all shareholders.

You’re still in a battle with the SEC. How do you see the regulatory challenges unfolding this year?

If you step back at 100,000 feet, the regulatory climate globally has actually trended extremely positively over the last five years. You see that the trend line for most major markets recognizes that digital assets can and will play a role in the future financial system and that that's to the benefit of consumers, the benefit of businesses, the benefit of even governments.

If you look at it at a very high level, countries like the United Kingdom, Switzerland, Japan, Singapore have all provided very constructive frameworks. Yes, there's regulatory oversight, but they're actually encouraging that innovation. Your question, I think, is more about what's going on here in the United States. I think it's certainly disappointing and frustrating as a U.S. company to find ourselves where we are.

The SEC continues, in my judgment, to drag its feet. It just feels like there's a certain hypocrisy since the SEC is continuing to note that justice delayed is justice denied. But they're seeking delays all the time. What Ripple seeks is clarity, and a level playing field. The United States government and the regulators of the United States government should not be picking winners and picking losers.

There’s the view you have become much more combative, especially on Twitter.

The SEC declared war on Ripple. Are we being combative? I don't know. We're trying to defend ourselves. If you read their initial lawsuit, there's all kinds of allegations there that aren't actually grounded in fact. They've certainly contorted the facts into telling a story which doesn't represent reality.

I don't know if we're being combative. I think we're trying to get the truth. We're trying to get this resolved as expediently as we can. The SEC is dragging its feet. We got sued. You’d think that if they sued us, they'd have all the ducks in a row. And they're the ones dragging their feet. Of course I'm going to be combative.

There will likely be speculation that this move of buying back your shares is a step toward an IPO. Can you comment on that?

That is an astute observation. The United States does have the most liquid, the most vibrant, the largest capital market in the world. My hope and expectation is we'll get this case with the SEC behind us in 2022. Then we will evaluate where to go from there. I think ultimately the future for Ripple is that we will be a public company. But I don't think that's a question we're spending a lot of time on today, given where we are with the SEC lawsuit.

The crypto market has been falling, together with the broader market. Do you think we are entering another crypto winter?

I've been at Ripple for seven years. There have always been interesting cycles. We've certainly dealt with this before.

I view this as part of the journey not dissimilar to what we've already experienced. I'm incredibly optimistic about what the future holds for Ripple and for digital assets broadly, particularly in a market where global economies are printing more and more fiat currencies that devalue the currency that everyone is holding.

What is your biggest worry on the regulatory front?

I'd say I'm optimistic. Again, if you step back over the last five, six years, most major economies have leaned into crypto in a way that is supporting innovation that is good for businesses, good for consumers.

Now, the wheels of justice and the wheels of government change are slow. I think it's going to take time. But as is the case with a lot of new technologies, people try to paint it, as the chair of the SEC said, by saying the “Wild West.” No, it’s not. Here in the United States, the crypto industry is actually quite regulated, not by the SEC, but by the CFTC. So it's kind of like painting a picture of crisis and drama by saying the “Wild West,” but the facts don't bear that out.

There’s the view that most crypto companies want the SEC not to be involved or to have its role minimized in any kind of new regulatory framework. Is that your view?

When you see a regulator going above and beyond and really stretching the mandate that has been given to them by law, it’s overreach. It’s like a power grab.