Ripple Lawyer Says SEC Won’t Back Down on Crypto Crackdown, Urges US Entrepreneurs to Move Overseas

Updated: 26 July 2023

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The Securities and Exchange Commission (SEC) won’t back down on its policy of “misguided regulation by enforcement,’’ and so US crypto entrepreneurs should set up their businesses overseas, said Ripple Labs Inc.’s lawyer.

“Go out and create your company outside the US and do it in a place where they have a clear regulatory regime,’’ said Stuart Alderoty, Ripple’s chief legal officer, in a TechCrunch podcast. “Otherwise, you’re still going to face the hostility that we face in the crypto industry in the US.’’

Alderoty’s remarks follow Ripple’s victory over the SEC in a landmark legal case on July 13 that found the company’s digital token, XRP, is not a security when sold to the public. The judge also ruled that it is a security when sold to institutional investors, giving the SEC a partial win.

30+ years as a lawyer, and crypto is, without a doubt, the most fascinating industry I’ve been a part of.

Thank you @jacqmelinek for having me on to discuss what the lawsuit decision means, where the SEC has jurisdiction (and more importantly where it doesn’t), and much more. https://t.co/lozorZeTyL

— Stuart Alderoty (@s_alderoty) July 25, 2023

SEC Versus Coinbase, Binance

If the SEC appeals the Ripple ruling, as it’s hinted it will, Alderoty said the outcome may even be that the decision is amplified ”to even a greater extent.’’

The ruling also will “play well’’ in the SEC’s upcoming cases against Coinbase and Binance, and the securities watchdog will be proven wrong in the courts in other future cases and by markets, which will push the technology offshore, he said.

The US has been falling behind the rest of the world, where governments are busily building comprehensive regulatory frameworks to protect the integrity of markets, protect retail investors, keep bad actors out, and foster innovation, he said.

“We need that comprehensive regulatory framework, and without that, I don’t think the crypto industry and the technology behind it, the brilliant entrepreneurs that are driving it, will be able to really realize the full potential of this technology in the us, he said. “It’s going to continue to move offshore.’’

Some US politicians also are pressing the SEC to rethink its regulation-by-enforcement approach to policing the crypto industry. Republicans French Hill, Dusty Johnson, and Democrat Ritchie Torres wrote to SEC Chair Gary Gensler after the Ripple ruling to urge him to rethink his approach.

SEC Urged to End ‘Crusade’ Against Crypto

Torres criticized the SEC’s “haphazard and heavy-handed” approach and urged it to end its ‘’crusade’’ against companies in the crypto industry. All urged it to help establish a comprehensive regulatory framework for the industry.

Nasdaq said last week that it will abandon plans for a crypto custodial service because of the regulatory uncertainty that envelopes the digital assets industry in the US, while Gemini said it will expand its Singapore office by hiring more than 100 staff during the next year, and while Coinbase announced it was granted a license to operate a trading platform in Bermuda.

Billionaire Galaxy Digital CEO Michael Novogratz suggested earlier this month that the regulatory crackdown on the crypto industry in the U.S. will prompt many firms to shift more staff overseas, his included.

But while the SEC’s crackdown is unsettling many in the crypto industry, others say it is needed to lay the foundations for a stronger future.