Ripple CEO Brad Garlinghouse discusses where the Ripple v. SEC lawsuit is heading next, and speculates that SWIFT stands to be replaced in the near future in a live event in Toronto, Canada.
There is an expected imminent ruling in the discovery of whether the notes that the SEC have been withholding for the last 14 months have to disclose them, in their bid to their massive overstep to rule that Ripple is a security.
Garlinghouse is bullish because crypto is a Trillion dollar industry and 95% of its business is outside of the US, so it’s almost insignificant if they lose because the rest of the world has adopted the utility of XRP.
Ripple has just announced that along with offices in Miami and Dublin, they are opening an office for engineers in Toronto and plans to hire 250 people by the end of the year, and hundreds more around the globe.
At present, 20% of the population of the United States owns some cryptocurrency. Brad suggests that it sounds like crypto has been adopted mainstream. He compares the rise of the adoption to the adoption and growth of the internet.
Ripple’s Brad Garlinghouse at Toronto live event, January 1, 2023
Well, you just flew in today. Thank you so much for being here with us.
Absolutely. Got here last night. Late last night, but all good. Good to be here. Toronto is beautiful. Toronto is beautiful.
You’re also gonna be spending a lot more time here.
So starting with the news of the past couple of days at least, or the most recent news for Ripple, at least you are opening up a new hub in Toronto. You’re about to. 50 and probably a couple hundred more. So I want to start with that at a moment when a lot of the crypto industry is really struggling, some folks are laying off employees. Why now for Ripple, why are you hiring and why in Toronto?
So like, I’ll, I’ll start
by saying no one wants to see moments like this in crypto.
The layoffs are frustrating to read the hiring freezes. Uh, you know, one of the advantages of having a lot of gray hair is I’ve. Play before a little bit. Uh, we have been in a very strong position as a company. Uh, we, we have hundreds of open positions. Uh, we hope to add about 200 or 250 people between now and the end of the year.
Uh, as you described, you know, we just announced, uh, today the, or maybe it was yesterday, the opening of a office, our first office in Canada, which comes, you know, we’ve opened an office in Dublin this year, opened an office in Miami this year. And so in Canada, we’re really trying to make it an engineering.
Uh, we intend to hire 50 people here by the end of the year. We’ve already, uh, hired 10. And look, I think the big change that’s happened is it used to be Silicon Valley had a bit of a monopoly or certain advantage around tech talent, and that is just not true today. Uh, you know, schools like the Toronto Metropolitan University, Waterloo University, they’re extremely smart engineers based here, and we think bringing them into crypto and block.
Particularly at a time when maybe it’s, it’s not as exciting the the, the hype around prices, actually. It’s a time to build, it’s a time to, you know, look at the long term and create value. Yeah. Do you think it’ll be more challenging to recruit some of these students as they’re watching, right. As they’re watching the price of Bitcoin or the, all these other cryptocurrencies including XRP drop, that’s a pretty yeah.
Scary industry to walk into. I think the kind of people Ripple wants to hire, take the long. Uh, if you’re just chasing the money and the volatility or the hype, like that’s not really the kind of people we wanna hire anyway. Uh, so I don’t think it will affect much in part because I mean, look, look, look at this conference.
You know, we’re apparently in a bear market in technology, certainly a bear market in crypto. It’s packed. There’s over 35,000 people here. Uh, insane. There’s a lot of excitement around technologies that can change the world, and I think that’s always been. I think that’s true today in crypto and blockchain.
I think it’ll be true, you know, regardless of, you know, what the short term gyrations of crypto are.
Yeah. I wanna seize on that for a second. Um, the kind of people that
wants you are, uh, almost 700 people now. Adding in the new hires, you’re gonna be almost a thousand by the end of this year. Minus the few.
Yeah. Yeah. Rounding up a little bit, but, um, you, you kind of teased the fact that you were hiring quite heavily mm-hmm. earlier before this, Toronto News came out on Twitter, and I will read this out. You wrote, ripple is hiring hundreds around the globe. Uh, and I’m gonna cuss, I’m sorry. Fair warning. We have a no assholes policy here.
cussing now assholes? Cus I think asshole is cussing . Look, I, I think. At a time when there’s been a lot of attention on culture, some of it negative, uh, there’s a really aggressive piece by the New York Times about a crypto company. Certainly you’ve seen some tweet storms from other CEOs. Uh, I think culture matters.
I think you have to think about it. You have to invest in it. You have to be an intentional about it. And I think we do try to enforce a no assholes policy. Look, I mean, it, it pains me to say this to some degree, but we have hire. And subsequently fired some exceptionally talented people because they simply like, they couldn’t work well to other people.
And if you can’t work in a community, work in an environment where, look, everyone at Ripple wears the same colored jersey. We might have different numbers on the jersey, but we’re all on the same team. And if you think that’s not the case, then like you’re not gonna pass our no asshole policy and we’re gonna ask you to leave.
Yeah. That, and I don’t apologize for that, by the way. Like I, I’m proud of that. No, I mean, everyone’s version of you and I realize it’s different . And so to your point, right, the, the tweet storms that we’ve been seeing, there are some crypto CEOs that have very strong views that are controversial to probably the broader public.
Um, we saw the Kraken, and I don’t know if this is what you’re alluding to, but we saw the Kraken CEO on the same day that you tweeted that out, say that he had certain views about dni, about, uh, the use. N word among their employees. And so is that something that you’re trying to avoid among the people that you’re hiring?
Look, I, I, first of all, I think diversity inclusion does matter. And that’s diversity of thought. That’s diversity of, you know, all aspects. And so, like, I, I want people to feel comfortable working at Ripple, no matter their stripes. And I have read some of the stuff that I, I’ve read in the New York Times and I’m just like, you’ve gotta be kidding.
You know, this, uh, I look. I will also say, I think in some ways the world has become overly woke at times. That’s my own personal view, but Rip Ripple is a place where we care about people’s perspectives. We speak. One of our core values is around transparency, and I think there’s a way you can be direct with someone.
You can be very direct, but you can still be empathetic and not. And, uh, that to me is the difference between being an asshole and not an asshole . If, uh, if you can’t say something without thinking about, you know, how to communicate something that is direct, but also a, a aware of how that other person might think, Hey, look, I, I don’t know what’s true and I read the media, but some of the stuff I’ve read would not fly at Ripple.
Like, what? Well, you, you, you mentioned one specific thing, so I’ll, I’ll quote. Uh, there was a reference to like, maybe using the n word at work would not be inappropriate. I, I don’t remember exactly what was said, but like, come on. Yeah, I, I, I react to that and just like, I don’t get it.
The, this panel is talking about stream ation of crypto, and to be fair, that is kind of one of the challenges. It feels like a lot of this started, a lot of crypto started and with a very libertarian. That’s not to say libertarianism is racist, but there is a cohort of that subset that has very controversial views about openness, about that kind of opinion.
And so, um, that does end up being a barrier to entry for a larger mainstream audience. Um, so I’m gonna turn a little and pivot and talk a little bit about that. You know, where are we in the process of getting crypto to mainstream and how far are we. So look, uh, let’s, let’s first, if I can parse that a little bit.
I mean, mainstream. What, what is, what is mainstream, right? Uh, uh, the last data I saw is about, uh, there’s US data. So I apologize. Uh, I don’t know the Canadian data, but 20% of people in the United States own or have exposure to crypto. That’s feels kind of mainstream to me. I think when we’re talking about mainstream, we’re also, when people say that, I think, oh, you mean in terms of like use cases and utility and actually solving problems?
And it’s not just speculation and that, I think obviously it’s a journey. Now if you compare the the chart of like internet adoption to crypto adoption, you actually see it on a very similar curve. So part of my optimism about what’s happening despite the current downturn is look, if you step back and look at the big picture, web van went away, pets.com went.
That doesn’t mean that those technologies haven’t been profound and changed society in lots of ways. And I think the same is true in crypto and blockchain. We’re just seeing that journey and sometimes the hype gets ahead of the reality. You then you have a, a reset. We clearly have been seeing that the last few weeks, but, uh, I, I think, you know, mainstream is, you know, in the eye of the beholder.
I also think, you know, we have to look at it from, what about Argentina, where you already have crypto enter. You know, kind of mainstream payments, consumer payments, you know, uh, anyway, so I think it kind of depends on how you define mainstream. Yeah. I mean there, to your point, yes, crypto’s also a very broad term because there’s so much, so much part of it now.
There’s NFTs, there’s defi, there’s all these different aspects. Um, so maybe let me take a step back and say, what use cases do you see more promis in within crypto that can become main. Sorry, the last part. That can, that, that can become mainstream, that can be a new internet. So like, I, I, uh, I have publicly said that like NFTs in some ways are under hyped, but I’ve also gone on to say like, I don’t know how to think about art-based NFTs.
Right? Like, is, why is a board ape of one variety more or less valuable than another one? Like, I don’t know. But I also don’t know why a Van Gogh is more or less valuable than a Picasso. Like, that’s just not my, you own any NFTs? I do art nf. I don’t know o any board gave a, uh, but look, I, I think NFTs, the way I think about it, and not surprisingly, the way Ripple has kind approached this, it’s about utility.
There are NFTs that make it used that are, you know, solving a problem. And we can debate the value of art. And again, I’m not the expert at that, but I think the, the, the nature of what an NFT is to tokenize an asset and make it more easily, uh, managed. I’ll give one example. Rights management in h. Why can’t the, the, the ownership of content rights be an N F T?
You could buy and sell it. You can have smart contracts around it to determine the licensing. All of that now becomes transparent. Reconcilable, you know, today there are hundreds of thousands of people who, literally in Hollywood, all they do is fight with each other about rights payments. If you could actually move that to, or the, the right is an N F T and through smart contracts, you’re licensing that, like, to me that’s very powerful in making our society and our industry, our economy more efficient.
Anytime you have these high friction transactions, I think blockchains can be used to make those more efficient, more seamless. Ripple obviously started there around cross-border payments. We’re looking at other verticals, but you know, we, we kind of maybe think about this. Or enterprise first. And sometimes it’s not the consumer sexy stuff, but I think actually like solving customer problems is incredibly exciting.
And it, you know, I think a lot of people have come to Ripple because of that. Interesting. Um, right, cuz to your point, we knew, we know you better for payments for vis related crypto, but you are seeing it as movement of assets on a very basic level. Um, do you ever see yourself getting to supply chain crypto, uh, NFTs because that is Yeah, an enterprise application.
Well, so, uh, I mean, we have invested in well over 30 companies around crypto. We’re one of the most active crypto investors out there. You know, one of the things you and I were talking about backstage is we believe very deeply that all boats can rise. And so we have been a very active, uh, investor. We have invested in some companies that are doing stuff well beyond what, uh, ripples court use cases.
We haven’t yet talked publicly about some of the other verticals. Well, we did talk about, uh, we announced a hundred million investment in the carbon credit market. This is an industry that has all kinds of problems with, uh, authenticity, like people creating fraudulent carbon credits, trading them. The transparency and the ability to see the, uh, origins of carbon credits, I think is, uh, lends itself very well to blockchains.
And so I think moving carbon credit marketplaces onto blockchains, I think is likely and we’re, we’ve committed to invest a hundred million dollars to help catalyze that. Awesome. Um, the other part, I, so you are bull on fts. Very bullish. Um, one thing you’re probably a little more concerned about, especially in this market, seem, and we were also talking about this backstage was defi.
So tell me a little more about your view on that and why you’re concerned. It is a big market. It’s a big rising one right now. Yeah. But or has been in the past, before the, this couple of months. Sure. I, I, I will qualify this a little bit just by saying like, I don’t consider myself an expert at Defi. Uh, I, I said publicly on stage at an event last December when asked about defi, I just said, I’m.
You know, anytime you see yields of 20%, when you know, the, the, the kind of going rate yields and treasuries is, you know, maybe a hundred basis points or 200 basis points, I just think, okay, something’s not right here. I, I don’t get it. Like some something’s probably not sustainable in my lifetime. The experience has been the more risk you take, the higher yield you may get, but there’s more risk.
And it turns out that that might have been the case here. We just didn’t understand it. So, uh, look, I. I also like the word, uh, mainstream defi means lots of things to lots of people. The idea of staking and getting, you know, uh, way above market yields, I think we now have seen that maybe there’s a reason why way above market yields may not be as sustainable as we thought.
Uh, but that doesn’t mean at all that defi goes away. I just, I, as I said, I, I chose the word, I’m confused intentionally because I feel like there’s something happening there that I find interesting. I’m trying to learn, I’m trying to get. But there’s also clearly some noise that isn’t good for the system.
You pose yourself as someone who is learning about the space, is not necessarily very knowledgeable. So I’ll leave that the the caveat, but if you were to, when you’re looking at it, your instinct, at least when you’re looking at the defi space, what do you consider viable? Because it is a broad space, right?
To your point, what do you consider viable and what do you consider something that maybe we should be scrutinizing a lot more or not touching? Well, yeah, I, I’ll start, I’ll the last part there and the kinda the not touching. I, I think if someone, you know, a lesson in life that I feel like my parents taught me is if it looks too good to be true, it probably is.
I think that’s true today. I think it was true my whole lifetime. So there’s that piece, but there’s other parts of defi. You know, we talk about, uh, making a more inclusive financial system for a broader network of people, frankly, that don’t have access that we have here in the Canada or in the. And I think there’s examples like that where the defi ends up being about how do we think about regulatory frameworks and how they apply to decentralized finance.
Uh, you know, another example that is just gonna be interesting to watch are the DAOs, uh, decentralized autonomous organizations. And it, you know, a dao is compelling and interesting until it meets the real financial system. And the real financial system has laws around K Y C know your customer. So if a Dow wants to buy a real estate, And there have been Dows that have been raised to do that.
You know, there’s laws around money launder, and I know your customer and that you actually have to show your driver’s license or passport when you’re buying something like that to verify your identity. But if a Dow is buying that, how do you verify the identity? So I, I, look, I think, again, I’m, I’m compelled by defi in a, it’s fascinating.
It’s interesting. I think there could be really significant benefits, but we have to also recognize, and to your point earlier, The libertarian roots of crypto. We live in countries with laws. We may not agree with the laws. We may not like the laws, but we live in countries with laws and if we ignore the laws, bad things are likely to come.
And so your ripple has always had the view of like, let’s be pragmatic, let’s work with regulators. That’s frankly, I got here late last night cause I was at a central banker conference in Europe yesterday, and those meetings with central bankers actually I think are incredibly important for them to understand.
There is real utility in using crypto and it, the more we can, as an industry help regulators understand that the more I think we’ll move the whole industry forward. Yeah. So regulation, that’s something that you have dealt with a lot of, um, maybe not your favorite part. You are currently a part of a lawsuit by the s e c.
They sued you. This is old news by now, but they sued you in 2020 alleging that XRP is a security. You have taken the unusual step of fighting back versus going for a settlement. Um, I won’t go too much into the play by play, but give us an update in terms of where is happening now, what is happening now.
Um, you have said that, or at least your, your legal counsel has said that they expect a resolution by 2023. Does that still still feel like that’s the case? I, I think that definitely feels like the case. I mean, look, It’s incredibly frustrating to be a citizen of, and a country, a company based in a country that is behind almost every other country in providing clarity around crypto.
Uh, I mean, even here in Canada, Canada has approved a Bitcoin etf. The US has not. Uh, I, I, I think there’s so many examples where the US has been out of step with other G 20 economies, and again, I’m not talking about random. I shouldn’t, you know, small countries. I’m talking about like major economies who are providing that clarity and certainty.
You know, as you described, the, the Securities Exchange Commission sued Ripple saying that our sales of X RRP were investment contracts. It’s a kind of a nuanced point, and to your point, we’ve fought it. I think it is so important to fight it not just for Ripple, but for the whole industry. It, the, the S sec, I think is a hammer.
And when you’re a hammer, everything looks like a nail. And the new, the current chair of the s e C has said he thinks probably everything except for Bitcoin is a security. That’s a pretty bold statement. I think very, it would be very negative for the US crypto industry, and it’s the reason why I think a lot of people are moving outside the United States to build and invest in various, or speculate in various crypto projects.
Do you ever see yourself as a non-US company, right? Like you just gotta, you’re hiring a lot outside of the us. Do you ever see yourself as a non-US domic? Is this, uh, uh, it should not be lost upon you that Canada is not the US and we’re big opening a big office here. Look, I, it, I mean, it’s like any industry.
Sorry, . It, it’s like any company. If, if the country you’re based in is making it hard for you to be successful, you go other places. I mean, I, our, as a, on a percentage basis, our growth is much more outside the United States than in the United States. 95% of our customers are non-US companies. So, you know, look, we’re gonna continue to invest where we know how, what the rules are.
Even though there are a lot of libertarian roots around crypto, my experience is most actors in crypto want to play by the rules. But we have to know what the rules are. And you know, at the s E c, going back to one of the things you asked earlier, you know, they have been fighting us on the disclosure of certain documents.
So this is an entity by the way, which keep in mind what the S e C does. They demand disclosure from the companies they. And they won’t disclose anything. They had a judge 14 months ago, you know, tell ’em that they need to disclose the notes associated with this very famous speech that happened four years ago saying that Ether is not a security.
What are they hiding? Yeah. Like why? It’s been 14 months and they’re still fighting to, just to hide those notes. So, uh, walk us back a little bit. Tell us why that particular. Was so significant for you because you’re not X, you’re not ether, you are X rrp. But why was, does that matter for you? Well, sir, I’m Ripple.
We use X rrp. But look, in June of 2018, the A, a director of corporate finance at the S E C named Bill Henman gave a speech that was well known in the crypto industry because he really was the first time the s e C came out and said, ether’s not a security. And the reason it’s not a security is cuz it’s decentralized.
I viewed that and actually you now there’s an email that the SCC. Did I, I, I read that and I’m like sent an email to the team, like, this is good news. If you look at that measurement stick, that’s clear that XRP is not a security. Like let’s keep building and you know, now the S SEC is count. Well, first of all, they no longer will say ETH is not a security.
The current chair. You ask him and he won’t comment, which I don’t know how you have one administration, like, you know, again, like what are the rules? Let’s just be clear about the rules. Uh, so for Ripple, I think that speech was important. Like for the industry that speech is important. It does go back.
Ripple’s fighting this fight, not just for Ripple, but because the whole industry needs the certainty, the whole industry needs the clarity. If we want the United States, the largest economy in the world to be a major player in crypto, we need this clarity and certainty. And so far I I, I’m very happy with how the court case has gone.
Certainly, I wish it would’ve gone faster, uh, to your point around 2023, but, uh, we are fighting every step to make it go as quickly as possible. So I do have a question for the audience. Um, I am curious, and this is tied to what we’ve been talking about in the past 15 minutes, what percent of you to start off with, well raise your hand actually, I’m sorry.
Raise your hand if you currently own cryptocurrency of some kind. Okay, so that’s I 80. 80%. 80%. Okay. I’ll, I’ll say 70 . 70, 80%. Okay. Um, among those who do on cryptocurrency, how many of you think. Uh, most cryptocurrencies are securities. Oh, we got, we got a few hands. There’s a few Five. Five, maybe five hands.
Not a lot. Okay, so, no, let’s, let’s pause on that, just one second. Cause I think that’s interesting. So, to be a security, that means with the way law works, it means you get right title and interest of the ownership of the company. So think about that. So if you buy east, Do you get right title and interest in the company Consensus?
If you buy xrp, do you get to vote on who the board of directors is at Ripple? You know, you and I talked a little bit about stage about this. You know, ripple did a series A financing. We did a series B financing, we did a series C financing. The board of directors is voted on by our shareholders. X RRP holders are not our shareholders.
So when I, when I hear people say, well these are securities, I’m like, well, by, by kind of the normal legal definitions, they don’t fit very well. You might argue there’s something new and. Uh, you know, I think it’s very clear these are mostly commodities and I think should be regulated as such. No. All right.
So this week is actually gonna be pretty well, it’s gonna be interesting, right? To your point about the Hinman speech, the documents there, there is something happening may be happening this week, um, around whether or not those documents will be admitted to court. Can you give us an update? Well, so as I described earlier, we, 14 months ago, the s e c was ordered to turn over those notes.
Uh, they then have claimed other, you know, kind of delayed, delayed delay, delay. There was a hearing, I think it was last week or the week before, where the judge again listened to the s e c explain why they can’t, they shouldn’t have to turn those notes over. There should be a ruling imminently, meaning could be today, could be tomorrow, maybe it’s next week.
If you never really know when a judge is gonna make a rule. But, uh, this is again, just on discovery, but we expect that really and imminently. And I think, uh, it’s, it’s clear to us that, you know, the, the judge has previously said you have to turn these notes over. Uh, we’ll, we’ll see what the judge says this time.
You know, it is interesting to me like the, the chair of the s e c has said, justice delayed is justice denied, yet they are delaying this every single step of the way. Yep. So let’s play a very dangerous game of what if, what happened, . Um, I’m glad there’s only two minutes left. I know it seems to have to be a really fast game.
Okay, so I’ll start with what happens, right? If you do not get a ruling in your favor, X RRP is called a security. Um, in the United States, you would be outta the United States. No, no. I was clarifying your question. The only, the SEC only has jurisdiction in the United States and in some ways, uh, if you think about how the world is operating right now, it’s as if the case has been.
You know, uh, other than on Uphold and maybe a few other exceptions, you can’t trade XRP in the United States. You know, Coinbase halted trading, uh, others delisted it. So if, if we lose, if Ripple loses the case, does anything change? Like it’s basically just it’s status quo. Ripple is still growing very, very quickly.
Uh, well, there are still people betting that you, you could. This case? Well, I, I, yeah. I mean, I, I think that’s the case. , I’m betting that just to be clear and look, I, I’m betting that not just because of the tone of the questions from the judge and these kind of things, I’m betting that because I think the facts are on our side.
I’m betting that because the law is on our side and I think the s e c has massively overstepped into try to take kind of jurisdictional ownership over something that is, you know, I think they saw this gray area and they’re like, Hey, we’re gonna go in. Uh, but it, look, it, it’s frustrating that it’s taken this long.
Uh, there’s a lot of companies I think, realize how important this case is to the whole industry. Uh, so, you know, knock on wood, there’s some that think we’re gonna win. I happen to be one of ’em. Okay. Okay. So, but even if you don’t win, you, it’s operation as usual. You’re probably just not gonna be a very US-centric company.
Say you do win, what happens? You’ve spoken maybe in ipo, right? That might be coming. Well, the Securities Exchange Commission has to approve an S one in order for a company to be public. Uh, and so, you know, we go, trying to go public during that time doesn’t make a lot of sense, but you look, ripple has, uh, grown into one of the leading crypto companies out there.
Uh, I have said publicly before that I, I didn’t think Ripple would be the first public crypto company, nor it’d be the last. There are a few that have already gone public. There are a couple that were announced as SPACs that have gotten delayed. I don’t know the status, but look, I, I think this industry is maturing and growing.
It is here to. Even after this massive sell off, you’re talking about a trillion dollar global industry. It is a massive industry and I think it makes sense for companies like Ripple to take advantage of some of the most efficient capital markets in the world. Okay. Amazing. Awesome. Um, we are now turning ups.
Oh wait. I believe that means that we are out of time actually. Well, thank you so much for speaking and being in Toronto with us today. Um, amazing. Thank you. Have a good one.