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US isn’t prepared to regulate new industries like crypto, says Ripple CTO

US isn't prepared to regulate new industries like crypto, says Ripple CTO
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David Schwartz, chief technology officer of Ripple Labs, said that the response of US regulators to the crypto industry could ultimately help XRP but also likely hurt thriving businesses.

Ripple’s chief technology officer told Cointelegraph that he believes many crypto and blockchain companies considering starting in the US or moving abroad face a deterrent regulatory environment. He described US regulators as “overlapping systems” where bodies such as the Securities and Exchange Commission, the Financial Crimes Enforcement Network and the Commodity Futures Trading Commission may not reach consensus on what securities versus currency are in terms of digital assets.

“It’s very difficult to know what laws apply and how they apply to something new,” Schwartz said. “Which you don’t generally see in other countries – there’s an entity that makes the rules and at least you know you’re talking to the right party.”

he added:

“The United States is one of the few countries where there is a very tangible risk that regulators will turn to you and say, ‘That thing you’ve been doing for five years, in a public place and full of light?'” Well, you should have known it was illegal all the time.”

Schwartz’s comments come as Ripple faces legal action from the Securities and Exchange Commission, which filed a lawsuit in December 2020 alleging that the company, CEO Brad Garlinghouse and co-founder Chris Larsen were conducting an “unregistered and ongoing digital asset demonstration” using their XRP token. sales. The chief technology officer said he was wary of regulators taking down Ripple ahead of the lawsuit, alleging that any cryptocurrency company could be at risk of seemingly arbitrary crackdown.

“If we go through regulations that close the door to innovation and say ‘okay, we’re going to work hard on these other projects and make it very difficult for new projects to compete with them,’ that’s great for XRP,” Schwartz said. “That’s great for me, but as a human being who wants the best solutions for the world, it’s not a good solution.”

Since the news of the lawsuit emerged, several cryptocurrency exchanges have suspended XRP trading or canceled the token entirely. Global money transfer service MoneyGram has also reportedly ended its partnership with Ripple.

Ripple’s position in response to the SEC’s lawsuit was to claim that XRP is similar to Bitcoin (BTC) or Ether (ETH), both of which the regulator has designated as commodities. However, Schwartz’s claims that regulators indicated that Ripple “should have known” that XRP was an illegal security offering may have some significance. It took the SEC nearly eight years to file a lawsuit after the token was first issued in 2013, and the nature of XRP has largely remained unchanged.

“My first recommendation to the US regulators is: Look at the rest of the world and don’t stray too far.”

The full video interview with Schwartz is available here.