Blockchain Firm Ripple Likely Leaving US Over Regulation Frustrations

Blockchain payment services firm Ripple Labs Inc is considering relocating overseas due to a lack of clarity over regulation of cryptocurrencies in the U.S.

The San Francisco-based company has identified Japan, Singapore, as well as Switzerland, U.K. and the United Arab Emirates, as countries where it could set up shop, Bloomberg reported.

Ripple is a $10 billion financial technology firm which is best known for a cryptocurrency called XRP.

“The common denominator between all of [those countries] is that their governments have created a clarity about how they would regulate different digital assets, different cryptocurrencies,” Chief Executive Officer Brad Garlinghouse said.

In contrast, Garlinghouse noted, U.S. regulators have made it unclear how they classify cryptocurrencies – some consider it a commodity, others a currency, while some regard them as a form of property or even a security.

“Regulation shouldn’t be a guessing game,” he added. “Ripple is definitely a proud U.S. company and we’d like to stay in the U.S. if that was possible, but we also need regulatory clarity in order for us to invest and grow the business.”

In the U.S., officials at the U.S. Securities and Exchange Commission have said that cryptocurrencies like bitcoin and ethereum are not “securities” that should be regulated like stocks and bonds. But it’s unclear how they view XRP.

Garlinghouse singled out Japan which, he claimed, has created an “environment for a very healthy [cryptocurrency] market to develop,” he said.

Indeed, in 2017, Japan unveiled a registration system for cryptocurrency exchange operators – a measure widely construed as acknowledging that digital coins comprise a financial asset.

In addition, Ripple’s has links with SBI Holdings Inc., the Japanese financial conglomerate -- including a joint venture that provides global payment services via blockchain technology.

Last year SBI CEO Yoshitaka Kitao joined Ripple’s board.

“Japan is one of our fastest-growing markets, in part because we have key partners like SBI,” Garlinghouse said. “I have spoken to the SBI team about the fact we are looking at” Japan as a site of relocation.

Garlinghouse told CNBC that Britain’s Financial Conduct Authority, the financial regulatory body, does not consider XRP a “security” – which would also make the U.K. an attractive new headquarters for Ripple.

“What you see in the U.K. is a clear [classification], and the U.K.’s FCA took a leadership role in characterizing how we should think about these different assets and their use cases,” Garlinghouse said. “The outcome of that was clarity that XRP is not a security and is used as a currency."

"With that clarity, it would be advantageous for Ripple to operate in the U.K.”

He added: “The U.S. is out of sync with other G20 markets and how some of them think about these regulations.”