Ripple CEO Brad Garlinghouse on how the crypto industry will rebuild

Summary

SEC Chair Gary Gensler maintains skepticism of crypto despite Bitcoin ETF approval, still calling most assets securities. Ripple CEO Brad Garlinghouse predicts eventual crypto regulation clarity in the US, though timing remains uncertain. He discusses Ripple's growth into custody along with other verticals, stock buybacks providing investor liquidity without urgency to IPO under hostile US regulators. Garlinghouse conveys optimism on crypto in 2024 with increased compliance and solving real-world problems, expecting retail caution but long-term trajectory mirroring early internet firms.

Takeaways

• 😊 Gary Gensler and the SEC have consistently lost court cases related to crypto regulation
• 👍 There is optimism that future SEC leadership will be more constructive in working with the crypto industry
• 🔥 Brad sees clear demand and growth potential for crypto custody services
• 📈 Ripple plans to continue growing through acquisitions in 2024
• 😎 Brad believes putting compliance first will put the crypto industry on a good trajectory
• 🎯 Ripple remains focused on blockchain infrastructure for enterprises
• 🤔 Brad doesn't see going public in the US as a priority given the regulatory environment
• 💡 Brad sees crypto following the dot-com hype cycle with long term potential
• ⏳ There is optimism that US crypto regulation will pass in 2024, likely around stablecoins first
• 🙌 Brad welcomes AI displacing crypto as the 'cool kid' and sees it as a sign of maturity

Q & A

What is Brad Garlinghouse's view on the SEC's stance towards crypto after the approval of the Bitcoin ETF?

Garlinghouse believes the SEC and its chair Gary Gensler have not changed their skeptical tone towards crypto despite the Bitcoin ETF approval. He thinks Gensler is repeating the same stance unsuccessfully and has become a political liability by not acting in the best interests of US citizens and the economy.

How does Garlinghouse view the prospect of an Ethereum ETF being approved soon?

Garlinghouse is confident there will be other crypto ETFs approved after Bitcoin, including for Ethereum, though he does not want to speculate on the exact timeline.

What are the chances of comprehensive crypto regulation being passed in the US in 2024 according to Garlinghouse?

Garlinghouse believes there is a good chance legislation around stablecoins specifically will pass in 2024, as the US Treasury wants it. He thinks regulatory clarity is needed on stablecoins and will benefit the crypto industry overall.

How can the US regain leadership in crypto according to Garlinghouse?

If clearer crypto regulations are passed in the US, Garlinghouse believes it will help the US compete again as a leading jurisdiction for crypto. Other countries have taken the lead partly due to lack of regulatory clarity in the US.

When does Garlinghouse expect the Ripple vs SEC lawsuit to conclude?

Most of the case has been resolved in Ripple's favor already with the charges against Garlinghouse and Larson dismissed. Only a small part around institutional XRP sales remains open but Garlinghouse feels confident of the outcome after repeated wins.

What are Ripple's main areas of focus and growth in 2024 according to Garlinghouse?

Ripple will continue growing its core RippleNet payments business and newly acquired custody business, which is seeing high demand already. It will likely expand into other verticals through acquisitions given its strong balance sheet.

Why is an IPO not a priority for Ripple currently according to Garlinghouse?

With no immediate need to raise capital and an unfavorable regulatory environment in the US, Ripple is not prioritizing an IPO right now. Shareholder liquidity is still important though, hence the share buybacks.

How does Garlinghouse explain the more cautious crypto retail investor sentiment currently?

Garlinghouse thinks retail investors may be more cautious given the crypto winter following hype and speculation. But he encourages long-term thinking, as the internet went through similar cycles before mass adoption.

How does Garlinghouse feel about crypto losing the hype to AI currently?

Garlinghouse feels it's good crypto is more boring now, as hype cycles are common with new technologies like AI. He believes crypto fundamentals remain strong for long-term growth.

What are Garlinghouse's thoughts on stablecoins being a key focus of US crypto regulation?

He believes regulatory clarity is needed on stablecoins, which have proven utility already. It will benefit the industry and bring any issues to light. Major stablecoins like USDT and USDC are here to stay in his view.

Outlines

00:00

😀 SEC stance on crypto unchanged despite Bitcoin ETF approval

Paragraph 1 discusses the SEC's unchanged negative stance on crypto even after approving a Bitcoin ETF. SEC chair Gary Gensler continues to call most crypto assets securities. Brad believes Gensler is acting against public interest and may eventually be replaced.

05:02

😊 Ripple lawsuit mostly resolved, institutional sales case continues

Paragraph 2 covers the status of Ripple's lawsuit with the SEC. The case against Ripple executives Garlinghouse and Larson has been dismissed. The judge ruled XRP itself is not a security. An aspect related to institutional sales continues in court but Ripple feels confident.

10:04

🤑 Ripple focused on payments, custody, exploring new markets in 2024

Paragraph 3 discusses Ripple's focus for 2024. They will continue growing payments and custody products. Ripple is cash flow positive and exploring acquisitions in new verticals like blockchain infrastructure for enterprises. An IPO is not a priority currently.

Mindmap

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Keywords

💡SEC regulation

The SEC (Securities and Exchange Commission) is the regulatory body in the US that oversees securities markets and trading. The video discusses the SEC's stance on regulating cryptocurrencies, with SEC chair Gary Gensler taking a restrictive view of crypto assets as securities. This clashes with the growth of the crypto industry and court rulings against the SEC's perspective. The script highlights the need for clearer SEC regulation to enable innovation in the crypto space.

💡Bitcoin ETF

A Bitcoin ETF (exchange-traded fund) allows investors to gain exposure to Bitcoin prices without directly holding the cryptocurrency. The video notes that the recent approval of a Bitcoin ETF in the US was a positive milestone, showing changing attitudes. However, the SEC expressed hesitation about further crypto ETFs, disappointing hopes of subsequent approvals.

💡crypto regulation

The video discusses the broader landscape of crypto regulation worldwide. While the US lacks clear rules so far, other countries like the EU have introduced regimes like MiCA. The script suggests comprehensive US regulation would help regain leadership in crypto.

💡Ripple lawsuit

The SEC filed a lawsuit against Ripple Labs and its executives in 2020 alleging unregistered securities trading. This long-running case has seen Ripple win a series of victories, with the judge ruling that XRP is not a security. However, some issues remain unresolved. The case has consumed much time and money.

💡crypto adoption

The video conveys optimism about growing crypto adoption by enterprises and institutions. It contrasts this sustainable trend to past retail speculation. Ripple's business growth signals rising real-world usage, especially for blockchain infrastructure.

💡crypto winter

The 'crypto winter' refers to the market crash of 2022 that wiped out significant value and caused contagion. The script suggests retail investors may be cautious about re-entering crypto markets following last year's 'crypto winter'.

💡compliance

The video emphasizes that the crypto industry should focus on compliance, safety and solving real customer problems - rather than purely speculative trading. Following recent scandals, prioritizing compliance will help crypto mature.

💡custody services

Providing custody solutions for institutional crypto assets is a growth area mentioned. Ripple acquired a custody firm and sees surging demand from financial clients for these services to securely store holdings.

💡SEC leadership change

The script states that a leadership change at the SEC would benefit crypto. The confrontational approach under Gary Gensler has stifled innovation. A new Chair could take a more collaborative, constructive approach to crypto oversight.

💡retail investor confidence

Despite the crypto winter, the video expresses confidence that a long-term view will be rewarded as the industry matures. Lessons have been learned from past boom-and-bust cycles. However, retail investors may be wary currently.

Highlights

Gary Gensler has become a political liability in the United States and I think he's not acting in the best interest of the citizenry.

There will be other ETFs for sure, but an Ethereum ETF, I'm very optimistic about what we're going to see this year.

The stablecoin market has really surprised people in some ways in terms of solving a real need.

If the US regulation does pass this year, with clearer rules for the industry, it will help the US compete with other jurisdictions who took an early lead.

Ripple's core product Ripple Payments has continued to grow and we'll continue to invest in more payout markets around the world.

Ripple entered the custody market in 2023 and our incremental investment in 2024 will be in the custody business.

Ripple thinks about entering other vertical markets beyond payments and custody through acquisitions.

Ripple has been cash flow positive the last couple years, allowing us to invest in acquisitions even with the market shift.

Going public in the US with a hostile SEC doesn't sound appealing, so an IPO is not a short term priority.

Shareholder liquidity is important, which is why we've done tender offers and repurchased over $1B in stock.

I'm optimistic about crypto in 2024 by focusing on compliance, solving real problems, not just speculation.

Retail investors may be cautious after crypto's difficult winter, but long term there's momentum despite self-inflicted wounds.

Crypto going boring now is a good thing - it's progressing beyond the hype cycle like the early internet days.

AI is transformational but business models unclear - crypto was similar years ago and now further along positively.

Bitcoin not far off its all-time high shows optimism for what we'll see in crypto this year despite recent issues.

Transcripts

it certainly didn't sound like the SEC

or or the chair Gary gansler changed

their tone even after the approval of

the Bitcoin ETF there was a statement

Gary genser said he didn't endorse

Bitcoin uh he still called most other

crypto assets Securities is this

postering or do you think there's a

chance yesc has changed its

stance there's an expression about you

know one of the definitions of insanity

is doing the same thing over and over

again and not expecting a different

outcome I think Gary gendler is doing

the same thing over and over again and

thinks that somehow he's going to win in

court he has continued to lose in court

uh I do think the chair of the SEC Gary

gendler has become a political liability

in the United States and I think he's

not acting the best interest of the

citizenry he's not acting the best

interest of the longterm growth of the

economy uh and I don't understand it and

I think at some point you know there

will be a new chair of the SEC and I

think uh that'll be a good thing for the

American people there were a couple of

interesting things after that Bitcoin

ETF uh was approved proved in that

statement one and I paraphrase here was

effectively G Gary genter saying just

because we allowed the Bitcoin ETF don't

think we're now going to allow a bunch

of other crypto assets the second

interesting thing was the price of ether

skyrocketed immediately after on hopes

that they could now next be an eth ETF

um what are the chances of that I think

it's a certainty

I I I I I'm not going to put a horizon

on the time but I think there will be

other ETFs for sure X1 there will be

other ETFs for sure but but an xof

E1 I love this game we play look uh I am

very op that's fine the sad part of that

reality is we have a Bitcoin ETF only

because a US court said to the SEC

you're being arbitrary and capricious in

your apply of your applic application of

the law what would be sad is if every

ETF had to go through that same Journey

journey and for Gary gendler to get

smacked down by the US court system

again that that might be it might be

necessary but you know again at some

point I think Gary gendler won't be the

chair of the SEC and that'll be a good

thing for the American people there's

what the secc does and then there's what

is going on in Washington uh in amongst

lawmakers and that's those are those are

linked but also separate now the US

hasn't passed any kind of comprehensive

regulation around uh crypto assets at

this point unlike you know you see in

the European Union with Ma and some of

the other jurisdictions you mentioned

earlier as well to buy um but there are

a number of bills trying to make their

way through the lawmaking process one of

those is around stable coins there a

number of other others as well um do you

think that in 2024 there is the

political will given it's an election

year as well to to pass some of these

bills and bring them into law I I said

earlier I don't like to predict things B

based on time and this one I will I

think this year there will be uh

legislation that passes I I won't be as

uh you know predictive about which one I

think it likelihood is that the

stablecoin uh Clarity for stable coin I

can't remember the name of the bill that

has been uh you know going through the

the system in Washington DC but I think

we will see that in part because the US

Treasury wants it right I think the

stable coin Market has really surprised

people in some ways in terms is solving

a real need and I think it only makes

sense for there to be regulatory Clarity

around that I think that's good for the

whole industry and you know one of the

things we you said earlier is you know

are there skeletons in the closet the

stable coin Market because there hasn't

been clear rules of the road uh it'll be

interesting as that that comes to frish

you know the two primary obviously usdt

and usdc I I think they are you know

here to stay and I think you're going to

see other entrance in that market too

you you said before that the the U the

US risks losing some of the leadership

around around this industry that other

countries uh have taken a lead um and a

lot of that is due to what the SEC does

and the fact there isn't clear

regulation in the US if the regulation

does pass this year if there's clearer

rules for the for the road uh for the

for the broader industry does that help

will will the US be able to compete with

some of these other jurisdiction who

took an early lead in in this industry I

I for sure yes I I don't think the the

market has passed the US I think it has

passing and you are seeing I mean look

we have publicly shared uh over 70% of

Ripple's hiring last year was non- us

despite the fact that there's still a

majority of our employees in the United

States why would we want to hire in a

market where we have a hostile

government we have a government who

won't provide the clarity we have asked

for where we had to fight for years and

spend well well over100 million doar in

the court system to fight them so you

know there will continue to be a lot of

activity I think in London in Dubai in

Singapore or in some of the other uh you

know Capital Financial capitals of the

world but I think the US eventually

figes it out uh I don't know how to

predict what's going to happen in the

election cycle but no matter what

there's going to be you know a shift if

you will and I think we will see a shift

at the SEC hopefully to a a new chair

that is uh constructive and wants to

work with the industry and not put their

own agenda ahead of the the American

peoples um I've been asking you this

since 2020 because that's how long it's

been going on for Ripp

versus the SEC lawsuit when when do we

get a conclusion look but most of it has

been resolved right so the SEC filed a

lawsuit in December of 2020 so just over

three years ago against me against Chris

Larson and against Ripple the case

against uh Chris and Brad myself uh have

been dismissed entirely with prejudice

meaning they can't ever bring it back

and the case against Ripple they lost on

everything they cared about I mean their

primary tenant was that xrp is a

security and in the judge Torres opinion

what she wrote is xrp is in of itself

not a security so I feel very good about

that the SEC then asked for approval to

appeal that decision and that was denied

so I mean look the SEC has lost

consistently in this case uh there is a

piece of the case that continues around

institutional sales because investment

contracts where Ripple sold xrp to in

institutions who wanted to speculate the

irony there is you know again the sec's

one of their missions is to protect

investors how many of our institutional

xrp sales did they lose

money

none like what are we arguing about what

are we anyway so look that will uh

proceed through the court system for a

little bit longer but I I feel very good

about where we are and I I I frankly

really pleased for the whole xrp

ecosystem and the whole crypto Market

benefited immensely from that legal win

um just for the last five minutes Brad

let's talk about Ripple what your focus

is this year where where you're going

and the future um um for for 2024 where

are you putting your energy well a

couple things come to mind there

obviously uh our core product R Ripple

payments has continued to grow uh and

that's something we'll continue to

invest in more uh payout markets around

the world we uh through an acquisition

entered the custody Market in 2023 uh

certainly a lot of our investment our

incremental new investment in 2024 will

be invested in the custody business uh

is that in ant is that in anticipation

of of some of these bigger investors

getting in to the markets and well I

mean I on one hand I say yes however

there's already a tremendous amount of

demand I mean that business is growing

very quickly we announced publicly just

a month or two ago that HSBC is a new uh

client of that business so you know

these are Big accounts as well as more

mid-market accounts the custody business

is very real and is going to continue to

grow nicely you know I do think Ripple

thinks about entering other vertical

markets so payments custody I think

we'll do other things in 2024 some of

the those will probably enter through

acquisition uh we've been super

fortunate to have a very strong balance

sheet at a time that uh you know that

the market has shifted and the the

valuations of a lot of these companies

is not what it once was that's been an

opportunity for us and so we're going to

continue to play offense and what are

the areas that interest you

then I was thinking about being your

wardrobe

consultant no I'm not going to announce

the world you know the key areas but

look ripple at its core is a block chain

infrastructure company serving

Enterprises we started with payments and

financial institutions we've moved into

custody a lot of overlap with those same

financial institutions uh but we're

going to expand with that same thematic

of infrastructure enterprise-based uh it

served us well and what what are your uh

growth expectations this year what what

Revenue growth are you tracking this

year will you be profitable this year so

you know we have been cash flow positive

the last couple of years uh you that has

been a unique place in the market and

allowed us to invest not only in the

core of Ripple but also in Acquisitions

even you know recently you may have read

we did a tender offer to our

shareholders we've now repurchased uh

over a billion dollars of stock from our

shareholders uh that's something that's

important to us quite frankly because it

is not an immediate term priority to go

public uh you know in the United States

trying to go public with a very hostile

regulator that has to approve your S1

that doesn't sound like a lot of fun to

me you know coin obviously had their S1

approved and now the SEC is suing them

for doing things that was outlined in

their S1 now that as I mentioned there's

a hearing tomorrow in the US about some

of that but I think it's indicative of

uh why would we want to subject

ourselves to an SEC that is openly

hostile to this industry so so in terms

of an IPO an exit of some sort is that

sort of parked to the side at this point

yeah you looking elsewhere outside the

US for a listing I I mean yes to all of

those uh

I don't think about an IPO as an exit I

think about an IPO as a step in the

journey uh you know shareholder

liquidity is important to me we have

investors that first invested in Ripple

in 2012 so uh they've been in this deal

for you know 11 and a half years and so

we want to provide that liquidity which

is one of the reasons why we've done

these tender offers and now per

repurchased just over a billion dollars

of stock uh you know we have looked at

other jurisdictions that have clear

rules of the road but honestly a lot of

people go public because they need to

raise Capital yeah Ripple is not really

in a place where we need to raise

capital and so it it is not a short-term

priority we're obviously keeping that

option open uh and we'll evaluate it you

know as time continues and we'll

evaluate again as we have uh new

Regulators sitting at the United States

SEC and I guess some of it's Market

dependent as well last year was an

interesting uh you know space with the

in the tech World more broadly there

were a lot of secondaries BuyBacks but

very few IPOs the market wasn't

obviously very great for him so I guess

it's also you know how how the broader

markets play out as well for sure that's

part of it and not just the public

markets but also the crypto markets and

you know I think uh coinbase's stock is

in a much stronger position now than it

was a year ago but uh obviously well off

its highs from three years ago when it

went public so I it's just not a huge

priority we have a lot of capital very

strong balance sheet we can continue to

play offense through an acquisition

point of view invest in the business

you know as we started this conversation

I am very optimistic about the crypto

Market in 2024 uh because of those

things around putting compliance first

right making sure we focused on solving

real problems for customers and not just

the speculative cycle I think will put

the whole industry and a really good

trajectory how do you think the retail

investor feels because the you know we

know in previous Cycles uh more broadly

you know you get the initial bump up

sort of at the phase we're in now and

what takes it really to those alltime

High is the the the the fever amongst

the retail investors now the last cycle

was was special it was a very different

crypto winter to one that we had seen

before characterized by a lot of

bankruptcies a lot of contagion and then

obviously the issues with FTX and

binance as well um do you think the

retail investor at this point may be a

little bit more cautious this time

around this cycle about dipping the toe

back in I I think probably yes but you

know look uh one of the I think

advantages I've been around the block

once or twice I remember the earliest

days of the internet as we know it and

you know the retail investor really drew

the hype cycle of Internet 1.0 and I'm

talking about 1999 2000 and then you had

a wash out in 2001 2002 and that was a

painful you know the dotc crash but

today when we sit here the some of the

most valuable companies on the planet in

alphabet meta you know these are

companies that were born of that era

and so I I think that what happens in

the short term around crypto is you know

I take a very long View and I I

encourage whether you're a retail

investor or an Institutional Investor I

think if you take a long-term view about

where these markets are going and why

there's so much momentum despite the

self-inflicted wounds I mean again as

you and I talked backstage Bitcoin is

not that far from its all-time high

right now yeah and I'm I'm very

optimistic about what we're going to see

this year um BR just as we WRA up uh I

was walking down the prominade yesterday

and crypto has been displaced by AI as

the cool kid on the block how do you

feel about that I'm thrilled you're

thrilled why look I I think that it's

good that crypto is boring now right

it's cryp I

don't look I I think uh everything every

new technology goes through a hype cycle

I think AI is also a technology here to

stay transformational in a lot of ways

but also not exactly clear what the

business models are how it's going to

play out and I think that's where crypto

was a few years ago and I think now

we're further along and I think that's a

very positive thing for the crypto

industry I'm excited about what's going

on in AI uh I'm I'm a Voyer not a

participant in that world but uh it's

going to be interesting rad always a

pleasure to speak to you that was a

well- win tour as always thank you so

much for joining me today Round of

Applause for Brad Garling CEO of r