Crypto startup Ripple is seeking a license in Ireland to drive expansion into the European Union

In this illustration of a photo of the cryptocurrency altcoin, she poses for a photo on April 25, 2018 in London, England.

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US-based cryptocurrency firm Ripple no longer derives most of its income from America and is looking to expand its reach in Europe, its chief lawyer said.

Speaking in an interview with CNBC earlier this week, Ripple’s general counsel, Stuart Aldrotti, said that “Ripple is effectively operating outside of the United States” today due to the fallout from its intense legal battle with the Securities and Exchange Commission.

He added, “Essentially, all of their customers and revenue are paid outside of the United States, although we still have a lot of employees inside the United States.”

At the same time, Ripple is expanding its presence in Europe.

The startup has two employees on the ground in the Republic of Ireland currently. Alderotti told CNBC that it is seeking a Virtual Asset Service Provider (VASP) license from the Central Bank of Ireland so it can “passport” its services across the European Union via an entity headquartered there.

Ripple also plans to apply for an e-money license in Ireland “soon.” Its commitment to investing in Europe comes despite a deep downturn in the cryptocurrency markets which has been referred to as the “crypto winter.”

The Central Bank of Ireland previously handed over a VASP license to cryptocurrency exchange Gemini.

Ripple, which helps financial institutions move money around the world using blockchain technology, has more than 750 employees globally, about half of which are based in the United States. UK for its annual event Swell.

The SEC ruling is expected in 2023

In 2020, the US Securities and Exchange Commission initiated a lawsuit against Ripple alleging that the company and its executives illegally sold XRP, a cryptocurrency created by its founders in 2012, to investors without first registering it as collateral.

Ripple disputes this claim, saying that the token should not be considered an investment contract and used in its business to facilitate cross-border transactions between banks and other financial institutions.

Alderotti said he expects a ruling on the case to arrive in the first half of 2023. Final legal briefs are due by November 30, after which a judge can either issue a ruling or refer it to a jury trial if they find any. Disputed fact issues.

“We are at the beginning of the end of the process in our case,” Al Deruti said.

As part of the proceedings, Ripple fought to obtain documents related to a June 2018 speech from former SEC official Bill Hinman, which it says helped its case. In the letter, Hinman said that sales ethercompetitor token, “are not securities transactions.”

Despite the tense row with the Securities and Exchange Commission, Ripple continues to “work very closely with policy makers in the United States,” Alderotti said.

XRP was once the third largest cryptocurrency, with a market capitalization of $120 billion in early 2018. However, it has fallen sharply since then, amid US regulatory scrutiny and a broader downturn in bitcoin and other digital currencies.

Last week, the sudden crash of Sam Bankman-Fried’s FTX exchange sent cryptocurrencies into a tailspin. CNBC previously reported that investment firm Bankman-Fried used FTX clients’ funds to conduct risky trades. The company ran into a liquidity crunch as customers demanded withdrawals and rival exchange Binance canceled its non-binding agreement to buy the company.

Bankman-Fried said he became “overly confident” and “careless” when he developed FTX into a $32 billion juggernaut. He said that, to the best of his knowledge, he believes FTX has raised about $5 billion in leverage, when it was actually about $13 billion.

Alderoty said FTX’s bankruptcy was “a call to action for responsible economic centers to work to make it right.”

What does the collapse of FTX mean for cryptocurrency market liquidity?

On Wednesday, Ripple CEO Brad Garlinghouse told CNBC that the idea of ​​not regulating cryptocurrency is “exaggerated.” But, he added, “transparency builds trust.”

“Cryptocurrency has never been just sunshine and roses, and as an industry it needs to mature,” Garlinghouse said on CNBC’s “Squawk Box Europe.”

Alderotti added that it was unlikely that Ripple would refer to the collapse of FTX and how it was handled by regulators in his case.

Some of the confusion surrounding XRP stems from the company’s partial ownership of the token. Ripple previously held up to 60% of the XRP tokens in circulation. It has since cut that amount to less than half, or 49%, according to Alderotti.

Ripple generates a large portion of its sales by releasing its supply of XRP on the open market. Alderotti said that for the past three years, it has only sold XRP to institutional clients, not retailers.

As a private company, Ripple does not disclose its revenue publicly. This year, the company has processed $10 billion in cross-border transactions with payment providers and other financial institutions using XRPa symbol closely associated with it.

Ripple, the company, has been valued by investors at $15 billion. XRP has a market cap of $19 billion, according to CoinMarketCap data.

Europe expansion

Ripple’s European expansion drive comes in anticipation of the EU’s MiCA crypto regulations that will come into force in the coming years. MiCA seeks to harmonize rules for crypto assets across the 27-member block. It was passed by EU deputies earlier this year.

The European Union said it may still need to come up with a separate system for non-perishable tokens, or NFTs, a specific type of digital asset that tracks ownership of art and other assets on a blockchain.

“I think MiCA is a very good start,” said Alderotti.

The UK is also a priority. On Monday, Ripple released a set of guidelines outlining how it believes Britain should regulate cryptocurrencies.

There is a bill working its way through the UK Parliament that would give the financial regulator greater oversight of cryptocurrencies, but this has yet to become law.

Crypto executives are hopeful that Prime Minister Rishi Sunak, a fan of cryptocurrency and the so-called “Web3,” will issue regulatory clarity to make the country a more attractive place for companies to set up shop.

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