Behind Ripple’s Regulation Call: ‘Do Not Paint Us With a Broad Brush’
Ripple has a long history of pro-regulation declarations and actions, but this time, its fervor appears to be profoundly reactive...
Ripple, whose business is built on providing financial institutions with an infrastructure to facilitate international payments and currency trades, has always been a more likely ally to governments and regulators than most other major blockchain projects and cryptocurrencies. Seeking to enhance rather than disrupt the operations of the legacy financial industry, the company has been long stressing the importance of a clear-cut policy framework for the banks to fully reap the fruits of blockchain-powered innovation.
The regulatory pushback against Libra, Facebook’s recently announced cryptocurrency, has apparently spurred Ripple’s determination to publicly take an even more pro-market-regulation stance. Late July saw the company’s leadership publish an open letter to the United States Congress (which also appeared as a full-page ad in the Wall Street Journal), urging lawmakers to differentiate between the industry players and “not paint us with a broad brush,” but to promote regulation that recognizes fundamental differences between various actors in the space. In taking this potentially controversial step, what message did the creators of Ripple, Brad Garlinghouse and Chris Larsen, want to convey?
The image of “The Other”
As noted in the letter, Ripple deploys blockchain-based innovations “in partnership with regulated financial institutions to enable the world to move money across borders” — a mission that is vastly different from the principles that informed Bitcoin’s original, subversive ideology. Some crypto purists even deny XRP the right to be called a true cryptocurrency on the grounds of the degree of the system’s centralization, as well as the fact that Ripple, the company, maintains control over a large share of XRP tokens.
While this debate is impossible to be definitively resolved absent a universal delineation of what a “true” cryptocurrency is, it is hard to argue that the way XRP is structured sets it apart from most other top coins, such as BTC or Ether (ETH), which operate on permissionless ledgers. This is perhaps the major fundamental difference that the letter emphasizes, the distinction between XRP and other high-cap digital assets.
However, there is more to it, since it is worth keeping in mind that the company Ripple, which issued the letter, is not synonymous with the XRP cryptocurrency. Ripple offers banks and other financial organizations products, whose main function is to decrease the costs of cross-border transfers; some of these solutions make use of XRP token, while others do not.
Clearly, the authors of the letter urge Congress not to lump them together with some other corporate entities that operate in — or are seeking to move into — the domain of payments traditionally served by in