Ripple Executive: Regulation Is the Biggest Risk We Face

A senior executive at Ripple has declared regulation to be the biggest risk the startup company faces in its quest to become a global payment protocol. To respond to the challenge, the San Francisco-based company is planning to assemble a large regulatory team to help navigate the complex environment.

Ripple’s Regulatory (and HR) Hurdle

In a panel session hosted by the University of Pennsylvania’s Wharton Scale School, Ripple’s Senior Vice president Asheesh Birla described the regulatory hurdles facing his company over the next two years:

“We’re in an environment where regulation is so important and our biggest risk … is regulation. We are building out a very big regulatory team and we’re making sure that we’re going around the world… for the next 1,000 customers that we want to bring on… which we think we can in the next two years… that regulation’s not going to be an issue.”

Birla also suggested that Ripple may face challenges recruiting and maintaining top talent given the four-year vesting period that normally characterizes Silicon Valley startups. As Birla noted, four years are not enough time for fin-techs to deliver a return on equity.

“The problem with Ripple… is that now we have people now in their fourth year – we’re not really giving that much equity compared to four years ago and so what’s your incentive to really say? So, that’s a problem for us right now. People are staying because they love the vision.”

Is XRP a Security?

The biggest regulatory question facing Ripple is whether its XRP currency should be classified as a security. Although the company has vehemently denied XRP’s security status, U.S. regulators appear undecided. What’s more, multiple lawsuits have come forward claiming that XRP is in fact a security and should be regulated as such.

Ripple has hired former SEC chair Mary Jo White to represent the company in a class action lawsuit that was filed in May by investor Ryan Coffey. The plaintiffs claim that Ripple profited from price increases in XRP at the expense of investors due to its centralized ledger. Roughly 60% of all XRP tokens are held by the parent company.

Although the debate continues, Ripple CEO Brad Garlinghouse has offered compelling reasons why XRP should not be considered a security. For starters, the XRP would continue to function even if the Ripple company closed its doors. This essentially means that purchasing XRP is not equivalent to buying shares of a company.

XRP is also said to solve real world business problems tied to cross-border transactions and liquidity, which means it fulfills a utility function as opposed to a security function.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi