Fireside With Ripple's Brad Garlinghouse l KBW2024

thanks for that introduction atai I am Jacqueline melanic I am the co-founder of token relations and I am joined with the CEO of Ripple Brad garlinghouse as many of you know Ripple had a ongoing case with the SEC that lasted three maybe four years depending on who you ask yeah and essentially they were in and out of the headlines from December 2020 to now right always in the headlines and essentially Ripple scored a win against the SEC and it determined that xrp is not a security which is huge I think it's not just important for ripple it's not just important for the xrp community it's also important for as we're introduced the crypto industry at large yeah I mean the good news is there's a lot of countries around the world that have leaned into providing clear rules of the road for crypto the United States is not an example of that unfortunately and the US is the largest economy but uh it was super important I think to set the precedent for the crypto industry at large that just because it's a token does not mean it's a security which was kind of the approach the US SEC was taking so uh we feel really good about it and I think there's going to be more wins uh Kraken just scored a win in the United States a week or two ago and uh I think we'll eventually get to a better place yeah and we'll definitely talk about the other cases going on with the SEC but aside from the initial $2 billion price tag that they wanted to give Ripple uh which was reduced by like 94% what made Ripple really want to go all in and be like we are going to fight this it's not okay you know I think it's an important question and actually one of the things I would challenge other companies that are being attacked by the S the there aren't that many companies that actually can stand up to a bully and the CC has a lot of power and it takes a lot of money and a lot of conviction to fight that but we we really did from the very very beginning believe that we were on the right side of the law and that we'd be on the right side of history and to some degree the industry needed people to step up to the bully and you know it's just really frustrating because in the case of Ripple and the case of other cases the SEC has tried to prosecute there aren't victims no one lost money so they're they're actually going after things for reasons that you're like wait like what's your end goal here the goal of the United States SEC the mission statement starts with to protect investors and you're seeing more often now them going after things like okay no one lost money but you say you're protecting investors what's really going on and it it is I think political okay I think there are some politics at play in the United States and I think Gary gendler the chairman of the SEC has been you know more focused on power than he has on sound policy and I think that's starting to change and I think you know he really has hurt the the his party he's a Democrat and I think it's it's hurt them in the the current election cycle and uh we'll we'll obviously see how that plays out I know we are in Korea right now but the US is having their presidential election this fall what kind of role do you think that will play an impact on the crypto industry there well I think no matter who wins the United States I think we'll see new leadership at the United States SEC so I think that's good that's good for crypto I think that's good for the United States uh you know I think you clearly have seen in the United States crypto has become slightly political and slightly partisan where the Republicans have kind of leaned in more so than Democrats I don't really get that uh why a party would be for or against a technology doesn't really make sense it's kind of like saying well the Democrats are against tcpip but the Republicans are for it you know typically people are for or against how Technologies are used and yes many Technologies can be used to great benefit to society and sometimes Technologies can be used in negative ways and the goal I think should be let's regulate to make sure that we're not using these Technologies in bad ways but it's bizarre to me that some Democrats have come come out and said you know crypto is just bad it's like well that's like saying email is bad that's like saying the web is bad I'm sure there was someone who said that back in the early 2000 by it's an interesting comparison I mean I I first got involved in the internet back in 1997 and there were people in the earliest days of the web that were like it's bad and you know look you it it's not wrong of course that Technologies new technologies can and will be used in ways that are not good that's been true in the history of time and it'll continue to be true the the challenge I think for everyone here particularly at a Korean blockchain week is how do we use these Technologies to make transactions more efficient to make business more efficient to make consumer experiences more efficient to make banking more efficient there's so many examples where decentralization can actually help that you know we need to unlock further and show as the last speaker actually was talking about show examples of how we're actually helping and these Technologies are helping that will I further unlock adoption yeah and I want to talk about uh ripples you know Enterprise businesses payments Etc but before we go over there how do you kind of view the other cases with the SEC in regards to other crypto entities you talked about Kraken there was the one that just recently was announced the wells notice for openc there's a lot of different ones out there that honestly I'm a former reporter and I became almost a legal reporter covering all this and when the Open Sea one happened I kind of like world my eyes because this it just feels like it's one after another so how are you viewing it as someone who like went through the ringer and now you're on the outside yeah when Gary gendler took over the SEC uh you know three years ago or so one of the first thing he did is he asked for more budget to hire more enforcement lawyers now you think about that okay so instead of taking the time to write laws and to codify here's how regulation should work for crypto he took the approach of we're going to go Sue some more people and you know look that's not a good way to create sound regulation and sound policy and sure enough those lawsuits have actually added confusion to the system and there's sometimes the SEC has taken the position that something's a security there sometimes they've taken a position that it's not and you've had judges really go after them uh you know in some of the ETF ruling uh the the judge wrote this is a quote said that the SEC was being arbitrary and capricious now you know this is pretty insulting to an organization that is supposed to work for the people and we forget like these are government organizations that are supposed to work for the people and I think many of them lost sight of that as uh I think the SEC kind of lost sight of that so the the case against openc look you know they're they're taking the position that nfts are securities you know that there's already been case law about how art meaning traditional art is not and that just because it might someone might speculate on the price of a piece of art that it might go up that doesn't make it a security and so look I think they have a losing case and I think it's really unfortunate for openc because look Ripple spent over $150 million US dollar defending ourselves not every company can do that and so I I don't know openc well I I respect the leadership there and I hope they're in a position where they can fight this fight because you know the the SEC is bullying people and I think it does set you know a dangerous precedent for other governments around the world and so I always try to highlight countries like the United Kingdom countries like Japan countries like Singapore countries like Switzerland that really have invested the time and energy to provide clear rules of the road because I think as you and I both have experienced most people in crypto want to follow the rules of the road we just need to know where the rules are yeah and the Bad actors will be shaken out eventually for sure I mean look one of the ironies is FTX and Sam bankman freed he read my mind was one of the ones I talking about yeah that set the industry back for sure uh and you know people say well it's the wild west and there aren't laws Sam's in jail there are laws and they were applied and I think you know he did some things he shouldn't have done maybe that was out of you know na maybe that is out of maliciousness I don't know but the idea that this is the the wild west I think is just that's not the real world no no we we live in a reality with laws we do and a lot of those laws are here in Korea Japan across Asia Pacific I mean look one of the uh Ripple's largest offices is in Singapore and the reason is that there's clear rules of the road we've worked with the metrop Met excuse me the ma Mas the uh monetary authority of Singapore we have licensing there we we're regulated by Mas and I think that's a very appropriate way for us to grow the industry we're willing to invest the time and energy and money to get the licensing but again there's some jurisdictions like the United States that instead of providing those rules what one last thought on this if people are following this closely the good news is there are legislative efforts and an important piece of legislation passed the US House of Representatives uh in July I think maybe was June called the fit 21 act uh fit stands for financial inclusion I don't remember but it is a market structure bill that provides Clarity for crypto it now has to go through the Senate and it's hard to predict in an election year how that will play out but I'm actually optimistic we may finally get legislative Clarity again not from the leadership of the SEC which one would expect but from our elected officials uh finally listening to the people that they represent I know you spent a lot of time in DC you just talked about something like that um what are they saying internally tell us what's happening so I've definitely spent a lot of time uh and ripple partnered with coinbase and andreon Horwitz in creating a what's called a political action committee to help elect people who are pro-innovation and pro crypto and I think that has had a big impact in helping crypto uh elevate on the radar of our elected officials in the United States I mean it's of course unfortunate we have to do those things to have the group is called Fair Shake that's an appropriate it's to get a fair Shake uh and you know I think the the topic is much more important I went to the Democratic National Convention in Chicago a couple weeks ago and before that to the Republican National Convention in Milwaukee and you know people it's on the radar and I think we're seeing movement on both sides of the aisle to you know provide that legislative Clarity I will tell you without any reservation Gary gendler is not a popular figure on either side of the aisle and you know I I heard that loud and clear at the Democratic National Convention I heard that loud and clear at the Republican National Convention and you when he goes and testifies before Congress you see a lot of hostility from both sides of the aisle in terms of how he has approached his position at the SEC who do you think will be next then do you have any ideas who are you going to vote for I haven't decided yet I I'm not making any news today uh I look I I think it is a it's going to be an interesting election for sure it's going to be very close uh I don't know what the right answer is uh okay there's there's pluses and minuses on both sides I think that's fair uh have you had a vacation since all of this has happened uh well the past three four years of work I I have tried I mean when the decision came out when uh Ripple won the case and they declared that xrp is not of security uh I definitely took some time and with some friends uh to celebrate a bit and you know with my kids uh so I think you do have to kind of step back and appreciate some of the the winds along the way and I I think it applies to all entrepreneurship and building companies in the crypto space is hard and there's a lot of obstacles and I think you do have to every once in a while uh appreciate and take stock of the good things along the way um with the resolution of the lawsuit now you know coming to fruition we talked about before we got on stage that majority of Ripple's users are actually outside the US but do you kind of see maybe the opportunity for iping in the US it's a good question I mean it uh as Jaclyn's described about 95% of Ripple's customers and these are banks financial institutions payment providers uh even on the the custody side of our business it's expands a little bit beyond that but about 95% of our customers are outside the United States and part of that is because when you have a lawsuit from a regulator like the SEC it freezes the market and people are like whoa I'm not going to touch this now after we've won the case one would think that might unlock the market the reality is the US government remains pretty hostile towards crypto in general and you know the uh the SEC approved coinbase going public in the United States and now the SEC suing coinbase for the same things they approved in their what's called an S1 in the United States so uh I have no interest in being public in the United States right now none uh eventually maybe we'll cross that bridge but uh for now you know I I'm not really popular at the SEC uh Gary gendler is a big fan of mine you're a headache I'm a headache for sure and I'm gonna keep being a headache I mean it's not that I try it benefited the industry in the end so by the way that's really important like I think we need people who are going to speak truth to power when the power is not following even the law I mean Gary gendler goes out and talks about some he used an expression called a digital asset security that is not a legal term that doesn't exist but he made it one no K well I I'll also tell you uh you know maybe more news to come on this but Gary gendler also has gone out to say this is a quote the leading lights of crypto in the United States are either in jail going to jail or being extradited to go to jail okay now is this an objective view of an industry or is this a guy who has just decided every actor in this space is a bad actor it's called defamation yeah that's not good I mean that means everyone in this room is screwed which is well I will say well I mean one of the first you and I obviously both hail from the United States but one of the first pieces of advice I give entrepreneurs who ask me about starting crypto companies is don't incorporate the United States you're just asking for legal bills incorporate in a jurisdiction that has clear rules of the road Singapore is great Switzerland's great the UK is great Japan is great there's a lot of good answers it just happens to be the United States is not one of them yeah yeah that's a it's a bummer given that we were both Americans but maybe things will change next time we talk um I want to talk about Ripple and your business the well the company everything Enterprise business payments custody everything and the new stable coin that going to be launched as well soon where are you seeing the most Demand right now internally in terms of all these products and services so we' have always tried to focus on the highest friction points so you know crossborder payments in particular trying to get money into and out of various currencies and across borders has always been you a point of high friction obviously some people will adopt crypto and just buy crypto and move it that's hard for a lot of people so our goal has always been to work with banks we work with pay pay providers so that we can actually make that faster and cheaper and and frankly simpler so we started with just crossb payments we acquired a custody company last summer out of Switzerland and now we have a ripple custody business that has certainly grown quickly that has some of the largest banks in the world HSBC is an example of a customer there uh and then as you mentioned we're in the process of launching a new stable coin and look I I think the stable coin Market is exciting and obviously has grown we're at about 170 billion dollar market today some have forecasted it to be $2 trillion do in 5 years uh you know Ripple already was using stable coins in our payment flows with our customers and there was a time when we were represent that Ripple was minting 20% of all usdc and so we felt like look it only makes sense obviously there was a big event last spring in the United States I mean a year 18 months ago where uh usdc deeg and we felt like there was an opportunity for a credible player that's already working with lots of financial institutions to lean into that market so we're very close to launching that look the last thing I'll say about this Ripple has always because we're in the payments business from our from our Origins we've always been a compliance first company we've always been a we need to work with Regulators we need to work make sure we have licensing in place and we think there's an opportunity for uh another another player in the stable coin Market to exist that focuses on institutions focuses on a compliance first point of view you said it's going to launch soon can we get an idea of when uh well we're a private kind of closed beta so we are live and that RL it's called Ripple USD RL USD have been minted in that framework we will certainly launch uh soon uh weeks not months okay that's that's a good estimate weeks better than months not years yes yeah regionally speaking uh we talked a lot about the us we are in Korea right now where are you seeing the most Demand right now maybe in the Asian market what are the trends that you're following here and talking about while you're in town look I mean part of the Reon I'm here is because Asia Pacific and specifically Korea has been such a leader and the enthusiasm around these Technologies has been so high so uh we've had a a vibrant business in the region we announced a couple things one we are working with a uh a number of local universities most recently yon where we are actually sponsoring research and education around crypto and blockchain Ed again not just about xrp but about crypto broadly uh my experience has been if crypto does well Ripple is going to do well also and so we want to see all boats rise with that tide uh we also announced a Korea Japan investment fund and we're providing grants for developers working on The xrp Ledger uh just this past weekend we had a hackathon here in Soul uh we had great participation a lot of activity so we're doubling down in this region and uh we we will continue to do so that's wonderful and I think one of the last major questions I have for you Brad is oftentimes I hear that regulation need for Frameworks Etc is something that inhibits institutions from entering the space and I'm sure you're nodding your head you see the same what do you think is needed to move the industry forward from a Global Perspective I mean I i' literally think the number one issue to move the industry forward is that regulatory Clarity on a global scale uh you know I know that the FSC here in Korea is looking at some rules uh that apparently will be evaluated in the first half of 2025 certainly the US seeing legislative movement there but I I think what's holding back the unlock in a lot of places is if we don't have regulatory Clarity you're going to continue to have financial institutions that are afraid to do this and uh when that fear exists they can't lean in aggressively and so I'm very optimistic look I'm more optimistic now the next five years of crypto than I've ever been that's exciting what about the next five years in Ripple what are you excited about or at least let's do 2025 let's start there 2025 well look obviously we're entering a new uh business line with our stable coin at you know custody has continued to grow we certainly think that the core of our business around crossb payments has continued to grow and adding more customers globally so look we're almost a thousand employees uh and quite optimistic about you know continuing to grow there but again I I really do focus on I want crypto to win the tribalism that has infected crypto over the past you know five years I think is starting to go away I want I'm bullish on so many projects Ripple has invested hundreds of millions of dollars in other crypto projects we will continue to do that because we think if crypto wins we're all going to win I love that lastly can you leave us with a piece of advice this is something I asked all my guests on my podcast and this feels like one so that's I didn't see that coming uh piece of advice let's see you know one of my favorite pieces of advice in life has uh this expression of take the professor not the class and I think that applies to jobs it applies to school and that people uh should go find people they love working with either in school or in professional situations and your your career you get to work with an amazing guy in Anthony Pompano and I think you know working with great people elevates everybody and I think that's true in all parts of your life amazing I love that Brad thank you so much much for taking the time to talk and thank you to everyone for listening in thank you all right perfect um yeah that was a great session and again as a business owner and entrepreneur