Ripple announced today that it has parted ways with MoneyGram, a high-profile customer of both its RippleNet and On-Demand Liquidity international payments products.
The announcement comes two weeks after MoneyGram said it was suspending use of Ripple’s ODL network, which uses XRP to facilitate payments for pennies in seconds, rather than the two-three days minimum and as much as $15 on a $200 remittance transfer. It will now discontinue use of RippleNet, which does not use XRP.
In announcing the end of the partnership, Ripple said in a statement: “We are proud of the work we were able to accomplish in a short amount of time, as well as the impact we were able to achieve in bringing this first-of-its-kind product to market.”
Ripple CEO Brad Garlinghouse added on Twitter that the two firms “are both committed to revisiting” that partnership in the future.
“While the lack of a crypto reg[ulatory] framework has needlessly muddied the waters for U.S. businesses [and] consumers, there’s no denying what Ripple and MGI have achieved together,” Garlinghouse said. “Billions of dollars have been sent and settled across borders through ODL w[ith] XRP.”
SEC lawsuit fallout continues
The move is the latest fallout from the U.S. Securities and Exchange Commission’s lawsuit against Ripple, its executive chairman Chris Larsen, and Garlinghouse. The suit says that the $1.3 billion in XRP sales made by Ripple over the past eight years, with $600 million made by the two executives, were illegal sales of securities.
The agency wants the company, Larsen and Garlinghouse to “disgorge” those profits and pay unspecified fines.
Ripple has pledged to fight the SEC’s lawsuit vigorously, arguing that many other countries’ regulators, including the U.K., Japan, Singapore, and Switzerland, do not consider XRL a security. And that the SEC had eight years to object after Ripple began selling XRP in 2013.
The company and Garlinghouse—and much of the cryptocurrency industry—have long criticized both the regulators and government for failing to make clear what tokens are securities. The sale of securities requires registration with the SEC, a lengthy process. They have also bitterly criticized the regulator for not making clear what makes a token a security, other than specifying—and not formally—that Bitcoin and Ether are not.
“The United States is the only country on the planet that has suggested that XRP is a security,” Garlinghouse said on an interview with Axios on HBO on Sunday, March 7. He added:
“This isn’t just bad for Ripple, it’s bad for crypto broadly here in the United States, and its driving the entrepreneureal activity out of the United States. That bodes poorly for the U.S. crypto industry at large.”
Axios also reported today that Garlinghouse said in an unaired part of the interview that if he was launching a new company in the cryptocurrency today, he would not base it in the U.S.
Garlinghouse added that if Ripple does lose the SEC suit, it will relocate outside of the U.S.—something the company has said it was considering even before the suit was filed on Dec. 22.
And while the lawsuit had had a huge impact of XRP’s price—Ripple owns 55% of the cryptocurrency—it won’t kill XRP itself, according to Garlinghouse:
“Even if Ripple goes away, XRP is going to keep trading.”
Last week, Garlinghouse said that its business outside the U.S. has not been affected by the lawsuit, noting that it has signed 15 new customers in the Asia-Pacific region since the lawsuit was filed.
It’s a different story in the U.S., where the major exchanges suspended trading in XRP shortly after the suit was filed.
They really had no choice in that decision, Kraken CEO Jesse Powell explained on Twitter on March 6.
Continuing to trade XRP would be a “[h]uge asymmetrical risk for exchanges,” Powell wrote, adding that they “[h]ave to assume SEC’s case is in good faith.”
Citing an earlier tweet by Garlinghouse that claimed crypto markets acted “under pressure” in stepping away from XRP, Powell noted that judges tend to come down on the side of regulatory agencies.
He added, “[i]f XRP found to be a security, SEC would say that exchanges should have known.”