Ripple chairman: Washington lobbying has led to poor crypto judgements

Reporting by Rebekah Tunstead and Michael McCaw

24 October 2018

Chris Larson, executive chairman and co-founder of Ripple, said mistakes have been made in the ways in which regulators have dealt with cryptocurrencies.

“Washington is in a learning phase,” he told an audience at Money20/20. “I have to say there was a debacle with the industry lobbying over the last year or so specifically around securities.”

Over the past year and a half, regulators have attempted to build rules around the growing cryptocurrency market, as it has proliferated to the extent that it has entered the derivatives world. Howevever, Larson believes that a small handful of Bitcoin holders are overtly shaping the agenda in their lobbying efforts.

“The industry really needs to look at what’s going to happen in the next five to ten years,” he said. “The industry has been hit by a number of poor judgements around the lobbying efforts of late. Frankly, I think there’s a couple of very large Bitcoin holders that have been powerful and influential in Washington.”

“That’s been a huge mistake. The whole industry should have been there – all the major platforms.

“Instead they came out with the very arrogant message that they’ll give Bitcoin a pass, and try and kill those other platforms. They’ve made the regulators murky and that’s backfired”

Larson was keen to point out that “any regulator past or present has served this country”, but also wanted to call out the former chairman of the Commodity Futures Trading Commission (CFTC) Gary Gensler who Larson believes has a “Bitcoin agenda”, and is trying to kill off crypto challengers.

“He’s been a Bitcoin advocator for months and months, and pretty much I think he’s been carrying a Bitcoin agenda.”

“We see him sometimes at conferences and we’ve spent lots of time walking through and telling him ‘here’s where you’re incorrect’ and trying to give him a really good grasp of how the industry works, then he agrees, says he gets it, and then goes off and repeats the same misinformation so clearly that looks like he has a Bitcoin agenda. I understand he’s a Bitcoin holder – he should disclose that if that’s the case.

“That’s a problem for the industry, that’s not how it should work,” he said.

“Fintech does not work unless you get the regulators and the institutions all in the same room to find some kind of common ground to make it all work.”

Larson acknowledged that the US financial regulatory landscape is complicated, but also that “this is the best fintech regulatory environment ever. We should be accelerating as much as we can.”

Larson went on to say that blockchain – the underlying technology upon which cryptocurrencies are built and maintained – can “complete the picture of globalisation”. While central banks are critical of cryptocurrencies, he said, they could help deal with systematic risk.

“Ten years after the last financial crisis, we still don’t have in place a way of dealing with the next one. This is where digital assets can really help because they can really help solve some of the key problems of global liquidity.”

However, he tempered that argument, by acknowledging fintech developments can be exploited. 

“I think we have to do a better job whether it be blockchain, fintech, or tech generally, in admitting that there are negative consequences...It can be a tool or it can be a weapon. There is no question that cryptocurrencies can change the world, but they can also be used by bad people to do things like money laundering, exploitation of children for example, and that, by the way, is a big issue that I think is going to be an emerging issue for tech.”

Larsen spoke of how "anger and bitterness" had motivated his career journey, and his desire to inject markets with transparency and simplicity.

“There was one phrase that struck me about how the industry works, and that was: 'in confusion, there’s profit,'” he said.

“Something that worked 15 to 20 years ago, which was happening throughout the world, was to move fast and break things. It was a very cavalier sort of adolescent approach to life. Just don’t worry about the consequences, everything will work out just fine.“

He pointed out that technological advancements can be seen as problematic for financial services, in that disruptions to processes must be avoided.  

“People are scared. When people are scared they don’t want to hear about how you’re going to break things or disrupt things," he said. "Technologies like blockchain are disruptive for sure, but the teams have to go out of their way not to be disruptive. It kind of makes sense. If I go in for an open heart surgery, a very disruptive procedure, I don’t want my doctor with his scalpel saying I’m here to disrupt you,” said Larsen.

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