Around the world, digital currency has seen substantial adoption, except in one region. The US is still lagging in adopting some type of framework to significantly manage the digital currency space and, as the largest consumer market in the world, the lack of clarity is prohibiting extensive global adoption. Jason Simon, a FinTech and cryptocurrency expert, discusses the stalled progress of US cryptocurrency regulations and what needs to happen for massive growth to occur.
One of the first cryptocurrencies designed specifically to address cross-border payments and banking transactions was Ripple (XRP), but it is caught in a regulatory quagmire that has continued to prevent it from being accepted on a large scale. Ripple CEO Brad Garlinghouse recently participated in an interview with CNN’s Julie Chatterley to discuss the company’s position and where digital currency is headed. Pointing out one of the main reasons behind the recent growth of cryptocurrency, Garlinghouse emphasized the massive amounts of currency that are currently being printed by governments everywhere and how this artificial inflation is driving demand for digital currency.
Simon explains, “Ripple has already proven how beneficial cryptocurrency can be for the efficient and cost-effective management of cross-border payments. It has performed a number of pilot programs with financial institutions around the world that have provided nothing but positive results for the value of cryptocurrency for payment transactions. However, without guidance from US regulators, its growth has been truncated.”
The US is far behind other countries, such as the UK and Singapore, in creating viable regulatory guidelines for the digital currency ecosystem. Some progress has been made, but not to the extent that big business and investors feel comfortable taking a more serious approach to cryptocurrency adoption. Ripple is a US-based company, but 95% of its customers are located outside of the country. This is an emphatic example of the need for the US to take a stronger position in developing regulatory guidance for the cryptocurrency industry. Until there is better clarity in the US, cryptocurrencies are going to have a difficult time finding greater support.
Regulatory frameworks are necessary for more adoption globally. Adds Simon, “The arrival of Joe Biden to the White House has led to more optimism that change could be coming. It’s well known that there are other issues the country needs to address, but the development of a robust economy is one of the top priorities. This implies the introduction of global financial solutions that can help reduce costs, and bringing cryptocurrency to the forefront can help the US and other countries find that solution.”
For Ripple, in particular, there have been issues in the US over how the cryptocurrency is defined. The company is in an ongoing legal battle with the Securities and Exchange Commission (SEC) over precisely that issue, but some progress is being made. The SEC has repeatedly argued that Ripple is a security and, as such, is bound by securities regulations. The agency is using that position to sue Ripple for what it alleges have been unlicensed securities sales.
However, Ripple and Ripple supporters have countered that it is a currency, not a security. With the two entities presenting their cases to the Southern District Court of New York, Ripple may have just received a bit of good news. Judge Sarah Netburn, who is assisting with the case, recently suggested that, based on what she has heard, Ripple is more a currency than a security. She asserted, “My understanding about XRP is that not only does it have a currency value but it has a utility, and that utility distinguishes it from bitcoin and ether.” While this doesn’t mean that the SEC is expected to lose the case, but it certainly gives Ripple – and all cryptocurrencies – much more legitimacy.