Ever since their inception, cryptocurrencies have railed against government interference and regulation. But Ripple wants governments to step in.
Ryan Zagone, director of regulatory relations at Ripple Labs, has urged the UK government to create regulation that strikes a balance between “capturing risk and enabling innovation”. In the interview with The Telegraph, Zagone compared the current state of cryptocurrency markets to the internet’s early stages. “We’re at that time now where we need more clarity and rules and we need more certainty. It’s a good time to start revisiting that ‘wait and see’ approach taken by regulators,” he said. According to him, regulation would create “guardrails” to attract new entrants, such as institutional investors.
To be sure, Ripple has always hewn itself close to the regulatory handbook. (See also: Ripple CEO Favors Government Regulation For Cryptocurrencies). Over the years, the San Francisco-based company has lobbied authorities in the US and UK on the benefits of regulating new technologies relating to cryptocurrencies. In 2016, Zagone wrote to members of the House Energy and Commerce Committee that a “workable regulatory framework (for financial infrastructure) is needed to keep the United States competitive.”
Zagone’s statements were addressed to the UK government’s task force, which was formed earlier this year to manage “risks around crypto-assets.” (See also: UK Government Launches Cryptocurrency Investigation). They are the first such positive affirmations regarding regulation from a prominent cryptocurrency. This far, crypto-enthusiasts have been at loggerheads with efforts by governments worldwide to assert legal authority over transfer and daily transactions of coins. In turn, this has prevented the flow of institutional money into cryptocurrencies and resulted in thinly-traded markets that shoot up or crash at the slightest hint of negative news. For example, the Chinese government’s attempt to bring order to cryptocurrency markets back in 2014 resulted in a prolonged price slump for bitcoin that lasted almost two years. Ripple’s XRP, itself, fell by 6% after Zagone’s comments were published. At 18:23 UTC, the cryptocurrency was trading at $0.64, down 3.5% from its price 24 hours ago.
Why Is Ripple Interested In Regulation?
The general cryptocurrency markets are expected to benefit from regulation because it will bring new investors and order. Ripple, itself, also stands to benefit from increased regulation. Its products assist in implementing existing regulatory initiatives for customers. For example, xCurrent, the company’s product for messaging between banks, complies with existing regulatory processes. “Based on individual domestic regulations, Ripple supports each bank to identify and assist with meeting all regulatory requirements,” the product’s brochure states.
But their main benefit comes from simplifying and expediting the complex rulebook that dictates cross-border transfers. Within the current regulatory framework, individual governments are responsible for writing and implementing regulations. This increases costs and complexity of operations for financial services institutions. In its statements, Ripple has repeatedly called for an international framework for its product suite. Regulatory clarity in a changed financial ecosystem will help increase the market for its products and bring in new customers for Ripple.
It could also benefit XRP, Ripple’s cryptocurrency, which has been on a downward slide on the back of a wave of negative media reports. Regulation for cryptocurrencies will increase its adoption among financial institutions using xRapid, Ripple’s product that uses XRP, and increase its valuation in cryptocurrency markets.
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