Big swings in the price of XRP, now the world’s third most valuable cryptocurrency, have largely been driven by one factor in recent months: Rumors that Coinbase, the largest U.S. Bitcoin exchange, will begin offering XRP.
While Coinbase has yet to do so, Brad Garlinghouse, CEO of Ripple, the company that created XRP, argued publicly for the first time Thursday that it should.
Headquartered in San Francisco, Coinbase currently offers buying and selling of Bitcoin, Ethereum, Bitcoin Cash and Litecoin, and will soon add Ethereum Classic, the company announced last week. But XRP, whose roughly $21 billion market capitalization exceeds that of all other cryptocurrencies except Bitcoin and Ethereum, has been passed over—despite reports that Ripple, which owns more than half of XRP’s digital tokens, tried to pay Coinbase $1 million to list it.
Ripple sells its blockchain technology to financial institutions around the world—some of which also use the cryptocurrency XRP to speed up and lower costs of international payments—and has long maintained that XRP’s value is likely to increase the more banks use it.
“As we solve problems at scale for institutions, I think it’s in Coinbase’s interest to participate in that,” Garlinghouse said Thursday in an interview with Fortune’s Jeff John Roberts at CB Insights’ Future of Fintech conference in New York.
XRP’s price has ranged this year from about 50 cents (where it was hovering at publication time) to nearly $4 in January, following a flurry of rumors that Coinbase was close to adding the cryptocurrency.
Still, Coinbase quashed a renewed round of such speculation in March, and has said that it will only trade cryptocurrencies that have been deemed by regulators not to be securities, a designation that could require exchanges to obtain additional licenses and approvals.
That could be why Coinbase and other American exchanges have been hesitant to trade XRP. An announcement last week by the U.S. Securities and Exchange Commission that Ethereum does not meet the definition of a security, because of its decentralized structure, also raised concerns that XRP might be classified as one, given Ripple’s majority ownership of and close relationship with the cryptocurrency. “Systems that rely on central actors whose efforts are a key to the success of the enterprise” would be subject to “application of the securities laws,” SEC official William Hinman said in the statement, though he did not explicitly mention XRP.
Garlinghouse, however, refuted the idea that XRP might fall under the SEC’s jurisdiction.
“I think it’s really clear that XRP is not a security,” he said at the conference. For one, he explained, XRP’s blockchain, or public ledger, “exists independent of Ripple,” and would keep functioning even if the company failed; what’s more, XRP tokens serve a technological purpose (facilitating monetary transactions) that traditional securities like stocks do not. XRP also does not entitle its holders to a stake in Ripple the company itself.
“I don’t think that our ownership of XRP gives us control,” Garlinghouse added. “Saudi Arabia owns a lot of oil—that doesn’t give them control of oil.”
To be sure, Garlinghouse emphasized, he does not have control over Coinbase’s plans. He declined to predict when XRP might be listed on one of the major American cryptocurrency exchanges, such as Circle, itBit, Square’s Cash app, or Robinhood. (At the moment, Kraken is the only major U.S. exchange to offer trading between dollars and XRP, and not in every state.) “I cant speak for what Coinbase decides to—or decides not to—do,” he said.
But exchanges seem to be waiting for regulators to clarify XRP’s status before deciding whether to allow it on to their platforms. Last week, trading company itBit received approval from New York regulators to add Stellar Lumens—a cryptocurrency created by a founder of Ripple—to its exchange, but has not yet sought clearance for XRP.