Roger Coleman Comments on Ripple and It’s Continued Growth

 

Roger Coleman recently put a ribbon on Q2 with his comments on the Ripple’s continued growth in the market.

“If I had to sum up the second quarter in two acts, it would be:

I.               Playing Offense

II.             II. Winning the Game. It’s hard to emphasize all of the goodness that emerged from this quarter in a single note, but I’ll do my best.” Said Coleman.

With Regards to the SEC Lawsuit: We Won!

The fight against the SEC was always about one thing: getting clarity that XRP (in and of itself) is not a security. We got that. XRP is NOT a security. XRP is one of only two assets in the US with that distinction (Bitcoin is the other). Crypto as compensation, developer grants, charitable donations are all NOT securities. And (to borrow a line from Stu) the finding on programmatic sales shot an arrow through the heart of the SEC’s campaign against exchanges trading “digital asset securities.” In fact, as soon as just a few hours after the ruling, Coinbase, Kraken, Bitstamp, Binance US, and iTrustCapital all relisted XRP for trading.

The Judge did find that institutional sales were unregistered investment contracts. Nearly all of our ODL business is outside the US (without objection from foreign regulators) and we’ve made solid progress over the past 2.5 years securing foreign licenses to run our business and thus, we believe, outside the SEC’s jurisdiction. In addition, these sales were to sophisticated commercial counterparties and we believe other securities laws would exempt these sales from registration. That will all need to be worked out in future legal proceedings. In the immediate near-term, we will make changes to some of our customer relationships in the US, but we expect our non-US transactions (transactions between our non-US entities and non-US counterparties) will continue as usual. You can read more about the ruling in our blog post here.

“While the case isn’t entirely over and done with, we are certainly at the beginning of the end.” Said Coleman. “We feel good about the win – it’s not only a win for Ripple, but a win for the industry – and that’s huge… especially with further regulation by enforcement with Coinbase/Binance and the SEC over this past quarter.” He added.

Defendants can now rely on the Ripple decision in defense of their cases. (Some of you probably noticed that Coinbase’s stock rallied 25% on our news)

The ruling also drew the attention of many legislators and we will now use our leadership position to continue our efforts to positively influence crypto legislation in the US. 

 

Welcoming Metaco to the Ripple Family

 

The big news in May, of course, was our acquisition of the Swiss-based technology company, Metaco, for $250M (full text). Not only was it the largest acquisition Ripple has done, it was also one of the biggest deals in the industry over the crypto winter. As I told team Ripple at the beginning of the year, it’s our year to play offense. And, we will continue to do that. 

While the ink on the deal was still drying, a cross-functional subset of the Ripple team jumped into action and has been focused on integration, working closely with Metaco’s leadership team. We hosted team Metaco in London for an onboarding week in June, and have been off to the races since then. I had a chance to visit the Metaco office in Switzerland after the PointZero forum event, and the team is very excited about the opportunity ahead. 

MAS License

As an important step in our global momentum, we received approval "in principle" from the Monetary Authority of Singapore (MAS, the central bank and financial regulatory authority of Singapore) on our Major Payments Institution License for Digital Payment Token services. Approval “in principle” means they are prepared to grant the license. Having this license ensures regulatory certainty for our existing business in Singapore which will enable further growth not only in Singapore, but throughout the APAC region.

Out of around 180 crypto companies that have applied for a DPT license with MAS, fewer than 20 in-principle approvals (and actual licenses) have been granted to companies – thus far to the likes of Crypto.com, Coinbase and now, Ripple. In terms of next steps, we still need to complete a series of administrative, governance and organizational steps before final approval. Given the growth of our Singapore business over the years, the importance of obtaining this license cannot be overstated.

 

 

Tender Offer

 

As many of you already know, this past week we closed a tender offer for our Series A and Series B Preferred shareholders with preferred shares. We allocated $100M in total to repurchase shares at ~$61/share, and with 70% participation, we were oversubscribed – with a 66% payout of shares submitted. With this tender we return more than we raised with the Series A and B, and I am very pleased to have been able to provide this kind of liquidity to our shareholders. 

 

 

 

As you likely recall, we exited Q1 with a lot of uncertainty around the banking sector, which had a number of impacts on our business – namely in terms of customer volume (we ended April at a lower month over month ODL run rate vs March) and a reevaluation of our risk appetite. Because of these factors, we missed our quarterly target for ODL volume and transactions – and though we didn’t see the quantity of transactions (volume or number) we forecasted, we improved the quality of our customer base dramatically through a reset of our ODL go to market and customer risk management strategy. It is unlikely the pace of growth we saw in 2022 will resume in the near term (when ODL volume grew by 5x) – however, with a high quality customer base, the acquisition of a foundational infrastructure technology with Metaco, and more than $1B in the bank, I’m confident we have the tools in place for a bright future.

 

 

Ripple Impact

 

We continue to stay focused on social impact efforts, including our University Blockchain Research Initiative (UBRI), which falls under that umbrella. We just celebrated 5 years of UBRI, and continue to grow the program, including with the recent addition of the University of Toronto to the ecosystem.  UBRI has now established more than 50 university partners across six continents, awarded 590 fellowships and scholarships, and supported the publication of over 1,000 research articles and presentations. \

We also published an Impact Report (intended to become an annual report). It touches on a range of the ways we made an impact in 2022, including ways our employees contribute to the communities we live and work in, and serve. From the earliest days, the vast majority of our employees have given back by donating their time and money both locally and globally, every year. Our social impact programs (and their positive contributions to our culture) are one of the many reasons why people choose to join – and stay at – Ripple. And, it speaks for itself. Ripple continues to earn recognition as a best workplace – earning #8 on Fortune’s list of Best Workplaces in the Bay Area, and placement on Fortune’s list of Best Workplaces for Millennials. 

 

Global Team Growth

One of my top priorities for the year was global team growth, prioritizing non-US hiring. Acquiring Metaco (which has an almost entirely non-US team) was a great boost toward achieving a better balance, but we also made meaningful progress through our standard hiring process, as well. More than half of our hires in Q2 were non-US based, and Q3 hiring is pacing even better.

We also welcomed a new board member in May, Warren Jenson. Warren brings to the table over 30 years of leadership as a seasoned CFO and global operations leader at companies like Amazon, Delta Airlines, NBC, EA and Nielson. He is also the chair of Ripple’s audit committee, bringing his expertise to advise on company growth and financial performance. We are thrilled to have him on our team.