TLDR
- Garlinghouse confident the crypto sector won’t return to harsh regulatory measures.
- SEC’s case against Ripple continues during Gensler’s leadership.
- Traditional finance denies crypto firms direct access to Federal Reserve systems.
- Ripple’s court victory in the SEC case over XRP.
Ripple CEO Brad Garlinghouse expressed confidence that the cryptocurrency industry will not face a return to a hostile regulatory environment, even with potential shifts in the White House. Speaking at DC Fintech Week, Garlinghouse emphasized that the industry has already moved beyond the stringent regulations imposed under former U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler. He noted that this shift is irreversible and that the “genie cannot be put back in the bottle.”
Crypto Industry’s Evolution Under Gensler’s Leadership
During the Biden administration, Gary Gensler led the SEC with a cautious stance toward the crypto sector. Under his leadership, the agency filed several enforcement actions against major crypto firms, asserting that most cryptocurrencies should be considered securities. Gensler’s approach was widely criticized for relying heavily on enforcement actions rather than developing clear, proactive regulatory guidelines. However, his tenure did not mark the end of all regulatory challenges for the crypto industry. Ripple’s legal battle with the SEC, which began in 2020, continued throughout Gensler’s time as chair.
In this case, the SEC accused Ripple of raising $1.3 billion through the sale of XRP, which it argued was an unregistered security. The court’s eventual ruling concluded that certain XRP sales were not violations due to their blind bid process. However, the court also ruled that direct sales of XRP to institutional investors were classified as securities. The case officially wrapped up earlier this year, marking a significant moment in the regulatory landscape for Ripple and the broader crypto industry.
Traditional Finance and Crypto’s Access to Federal Reserve Systems
Meanwhile, Garlinghouse criticized the traditional finance sector for its perceived hypocrisy in denying crypto firms access to key financial systems. Specifically, he pointed out the challenges that crypto firms face in securing a Federal Reserve master account. These accounts grant financial institutions direct access to the Fed’s payment systems and the U.S. money supply, a benefit currently not available to crypto firms. Without such access, crypto companies are forced to rely on partner banks, adding complexity to their operations.
Garlinghouse’s comments underscore the ongoing struggle for cryptocurrency firms to gain equal access to the financial infrastructure that traditional institutions take for granted. While the regulatory environment may have softened, crypto firms still face significant barriers in areas like access to Federal Reserve systems, illustrating the continued challenges the industry faces despite its growth.
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