Ripple seeks to leverage its growing presence in London with a regulatory white paper for UK policymakers
For UK legislators and regulators drafting laws on cryptocurrency policy, Ripple, the company operating a B2B blockchain payment system that uses XRP to facilitate cross-border payments, has published a “regulatory white paper” with recommendations.
Ripple publishes proposed guidelines for UK regulators
“To be able to operate most effectively here, to continue to grow our business, it matters what the regulatory framework looks like,” Susan Friedman, head of public policy at Ripple, said. “And so we are invested in trying to ensure the best outcomes.”
The report’s proposals are influenced by other regions that have advanced in implementing crypto law, such as Dubai, Singapore, and the EU. Differentiating between various forms of cryptocurrency for tailored regulation, collaborating between the crypto industry and the public sector, and educating lawmakers are just a few of the recommendations.
“We appreciate that the UK may not be the first mover in all of these, and we think there’s an advantage to that,” Friedman said. “There is value in seeing how different frameworks unfold and adopting best practices.”
The regulation paper is released when the cryptocurrency market is in a tailspin due to the catastrophic collapse of FTX, the second-largest exchange. The mismanagement of the exchange’s cash was first reported in leaked reports that surfaced earlier in November. This set off a chain of events that resulted in millions of customers losing their money. In Friedman’s opinion, this emphasizes how urgent it is to advocate for regulation.
“When you look at the past week, what we’ve seen is that absent a regulatory framework, what happens is providers will drive liquidity offshore,” she said, referring to the FTX headquarters in the Bahamas while it provided its services globally. “There is no separate mechanism for UK authorities like the Financial Conduct Authority to provide protections for consumers.”
The Financial Markets and Services Bill is now the primary vehicle for a thorough regulatory framework for cryptocurrencies in the UK after a parliamentary vote in October approved modifications to include cryptocurrencies in its purview.
The FCA will be required to write rules if the law is passed, and Andrew Whitworth, the policy director for Ripple, expects that Ripple’s recommendations will be incorporated into that process. Regulators in the UK will have an opportunity to work out the specifics of the new legislation once politicians have passed the bill.
“The FCA has the power to then go through and actually create the details of the provision,” Whitworth said in the same interview with The Block. “It should work since it is the same bill which creates an institutional framework and also includes crypto assets within the financial regulatory space.”
The critical suggestion made by Ripple is to implement a thorough legal framework that rates cryptocurrency assets by different risk profiles.
“There are different business models, different technologies, different blockchains. We’re not talking about one thing called crypto, which should be regulated,” said Whitworth. A crypto regulatory framework should “recognize the different risk profiles and provide them with different regulatory treatments,” he added. “It’s something the regulators know already about the traditional regulatory frameworks, but often when the policy discussion around crypto happens, that distinction gets forgotten.”
Ripple has been battling a lawsuit with the U.S. Securities and Exchange Commission, which in 2020 filed against CEO Brad Garlinghouse and co-founder Chris Larsen, citing a $1.3 billion unregistered securities sale.
“It goes to the core question of how different crypto should be treated,” Friedman said. “There is no question that XRP is not a security in the UK. Rather, the FCA has described XRP as a hybrid exchange utility token.”
“There needs to be some coherence globally,” Friedman added, “so that you’re not creating a walled garden so that the company operating in the UK can operate and the U.S. can operate in Singapore.”
Ripple is currently in the process of filing a reply brief to summary judgment, according to Friedman. They are expecting the judge to rule in 2023.
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