Ryan Fugger (Concept Originator) Alan Safahi (Advisory Board) David Schwartz (Chief Cryptographer and Chief Technology Officer) Ken Kurson (Advisory Board) Brad Garlinghouse (Chief Executive Officer)
Ryan Fugger conceived Ripple in 2004 after working on a local exchange trading system in Vancouver. The intent was to create a monetary system that was decentralized and could effectively empower individuals and communities to create their own money. Fugger later built the first iteration of this system, RipplePay.com. Concurrently, in May 2011, Jed McCaleb began developing a digital currency system in which transactions were verified by consensus among members of the network, rather than by the mining process used by Bitcoin. In August 2012, Jed McCaleb hired Chris Larsen and they approached Ryan Fugger with their digital currency idea. After discussions with McCaleb and long-standing members of the Ripple community, Fugger handed over the reins. In September 2012, Chris Larsen and Jed McCaleb co-founded the corporation OpenCoin.[3]
OpenCoin began development of the ripple protocol (RTXP) and the Ripple payment and exchange network. On April 11, 2013, OpenCoin announced it had closed an angel round of funding with several venture capital firms. That same month, OpenCoin acquired SimpleHoney to help it popularize virtual currencies and make them easier for average users.[4]
On September 26, 2013, OpenCoin officially changed its name to Ripple Labs, Inc.[1]
On May 5, 2015, Ripple received a US$700,000(equivalent to $899,789 in 2023) civil money penalty from U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) for “willful violation of the Bank Secrecy Act by acting as a money services business without registering with FinCEN.”[5] On October 6, 2015, the company was rebranded from Ripple Labs to Ripple.[6]
In September 2017, R3 sued Ripple for specific performance of an option agreement in which Ripple agreed to sell up to five billion XRPs for a price of $.0085. Ripple countersued, claiming that R3 reneged on a number of contractual promises, and was simply acting in a spirit of opportunism, after the cryptocurrency increased in value more than 30 times. In September 2018, Ripple and R3 reached an undisclosed settlement agreement.[8]
In March 2018, a Japanese bank consortium led by SBI Ripple Asia, comprising 61 banks launched "MoneyTap", a Ripple-powered mobile app to provide on-demand domestic payments in Japan.[9] In May 2018, Spanish Banking group Santander released One Pay FX — the first mobile application for international payments powered by blockchain technology, that uses Ripple's xCurrent technology.[10] Following the creation of a Mumbai office, Ripple has been adding multiple Indian customers in 2018, including leading banks such as Kotak Mahindra Bank, Axis Bank, and IndusInd, that announced that they started using Ripple's products.[11]
On December 22, 2020, the U.S. Securities and Exchange Commission charged Ripple and two of its executives with violating investor protection laws.[12] The SEC alleged that Ripple, co-founder Christian Larsen and CEO Bradley Garlinghouse, raised more than $1.3 billion through an unregistered securities offering. The government agency brought charges against Ripple[13] for the fault of depriving the “potential purchasers [of XRP] of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system,” according to the complaint that the SEC filed in federal district court in Manhattan, New York.[14] In April 2021, Judge Sarah Netburn granted a motion from Garlinghouse and Larsen to dismiss the SEC's subpoenas for access to eight years' of banking records, referring to the request as a "wholly inappropriate overreach." The defendants have already agreed to turn over all data involving XRP transactions.[15]
In May 2023, Ripple acquired Metaco, a Switzerland-based crypto custody firm for $250 million. In addition to expanding its potential customer base, the purchase also expanded the company's international presence during a time of increased scrutiny by the SEC towards U.S. cryptocurrency companies.[16][17] In June 2023, Ripple received approval for a license from the central bank of Singapore to offer regulated digital payment token products and services.[18][19]
In July 2023, the district court issued its ruling on the SEC lawsuit and stated that the XRP token sold by Ripple Labs was not a security. However, if sold in institutional sales, or used as a fundraiser, such actions could be classified as a security in those circumstances. More specifically, the programmatic sale on cryptocurrency exchanges do not meet the third prong of the Howey Test, so subsequent sales by exchanges are not securities. Judge Analisa Torres issued a summary judgement in the case after over two years of litigation between the SEC and Ripple, so the case could subsequently go to a full trial, or be appealed.[20][bettersourceneeded] In October, the SEC announced they will be dropping their lawsuit against Brad Garlinghouse and Chris Larsen.[21]
In March 2014, CrossCoin Ventures launched an accelerator which funds companies that work to advance the Ripple ecosystem. The firm funds accepted startups with up to US$50,000(equivalent to $64,352 in 2023) in XRP, Ripple's native currency, in exchange for a 3% to 6% stake in diluted common stock. Mentorship and support is provided by CrossCoin and Ripple Labs, Inc.[22]
Ripple also developed early partnerships with companies such as ZipZap.[23][24]
Ripple Labs was a co-founding member of the Digital Asset Transfer Authority (DATA) in July 2013. DATA provides best practices and technical standards, including anti-money laundering compliance guidance for companies that work with digital currency and other alternative payments systems.[25]
In 2018 Ripple donated a quantity of XRP valued at $29 million to USA public schools.[26]
In March 2019, Ripple announced a $100 Million fund for gaming developers which would be overseen by Forte.[27]
Recognition
For its creation and development of the ripple protocol (RTXP) and the Ripple payment/exchange network, the magazine MIT Technology Review listed Ripple Labs as one of 2014s "50 Smartest Companies" in its February 2014 issue. The criteria for the recognition revolved around "whether a company had made strides in the past year that will define its field."[28]
Controversies
On May 5, 2015, FinCEN fined Ripple Labs and XRP II US$700,000 for violation of the Bank Secrecy Act,[29] based on the Financial Crimes Enforcement Network's anti-money laundering (AML) additions to the act in 2013.[30] According to the FinCEN announcement: "Ripple Labs willfully violated several requirements of the Bank Secrecy Act (BSA) by acting as a money services business (MSB) and selling its virtual currency, known as XRP, without registering with FinCEN, and by failing to implement and maintain an adequate anti-money laundering (AML) program designed to protect its products from use by money launderers or terrorist financiers."[31]
Ripple Labs agreed to remedial steps to ensure future compliance, which included an agreement to only transact XRP and "Ripple Trade" activity through registered money services businesses (MSB), among other agreements such as enhancing the Ripple Protocol.[29] It has been argued that the changes made to the protocol did not change the protocol itself, but instead added AML transaction monitoring to the network and improve transaction analysis.[30] However the FinCen statement clearly indicated that Ripple itself was making changes to the protocol as a result of the enforcement action. "Ripple Labs will also undertake certain enhancements to the Ripple Protocol to appropriately monitor all future transactions."[31]
Ripple executives, including CTO David Schwartz, have admitted the software that is sold to banks for payments processing, XCurrent, is not a blockchain or any form of distributed ledger. Schwartz described it as "bi-directional messaging" that can eventually plug into distributed ledgers, but xCurrent’s technology itself "is not a distributed ledger".[32]
In May 2018, Stewart Hosie MP, at a UK parliamentary inquiry into digital currencies, questioned Ryan Zagone of Ripple about the value and nature of the XRP Cryptocurrency: "...but the point that was made earlier, Mr Zagone, is that if people buy XRP—a financial asset—from Ripple Labs, it does not entitle them to an ownership stake, there is no right to be converted back into conventional currencies and it does not pay any return. It also seemingly has no purpose. Is that simply to avoid XRP looking like a security or an equity, and to avoid the necessary regulation?"[33]
Ripple claims to be completely separate from and have no control over the XRP cryptocurrency, in spite of the FinCen press release describing XRP as "its virtual currency, known as XRP".[31] Ripple controls the vast majority of the supply of XRP[34] and, according to its own published records, earns the majority of its income from selling XRP.[35]
In 2018 the company's CEO claimed on multiple occasions that by end of that year "major banks" would be using Ripple tools that made use of the XRP cryptocurrency and that by end of 2019 "dozens" of banks would be using XRP.[36] Both predictions were false. At a conference in June 2019, Hikmet Ersek, CEO of Western Union, commented that his company had experimented with Ripple in 2018 but had chosen not to adopt their cryptocurrency based payments software because, "it's five times more expensive", than using their existing infrastructure.[37]
In 2018 and 2019 Garlinghouse claimed on multiple occasions that the published error rate for SWIFT messaging was at least 6%,[38] this was shown to be untrue by research published by the London School of Economics Business Review that showed Garlinghouse's claims were based on mis-reading of a paper published by SWIFT that did not refer to error rates in messaging.[39]
In February 2020 an article in Financial Times Alphaville revealed that Moneygram, the largest public user of Ripple's XRP based liquidity tools, had received a $50m investment prior to adopting the tools and also that the software was provided free of charge by Ripple and that Moneygram was receiving an on-going subsidy for using XRP, amounting to $8.9m in Q4 2019. The same article revealed that Ripple was dependent on sales of XRP to remain profitable.[40]
In October 2020, Ripple board member Ken Kurson[41] resigned from the company when he was charged with committing a range of cyber-crimes by the United States Attorney for the southern district of New York.[42]
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A cryptocurrency exchange, or a digital currency exchange (DCE), is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies. Exchanges may accept credit card payments, wire transfers or other forms of payment in exchange for digital currencies or cryptocurrencies. A cryptocurrency exchange can be a market maker that typically takes the bid–ask spreads as a transaction commission for its service or, as a matching platform, simply charges fees.
Virtual currency, or virtual money, is a digital currency that is largely unregulated, issued and usually controlled by its developers, and used and accepted electronically among the members of a specific virtual community. In 2014, the European Banking Authority defined virtual currency as "a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically." A digital currency issued by a central bank is referred to as a central bank digital currency.
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Ripple is a real-time gross settlement system, currency exchange and remittance network that is open to financial institutions worldwide and was created by Ripple Labs Inc., a US-based technology company. Released in 2012, Ripple is built upon a distributed open source protocol, and supports tokens representing fiat currency, cryptocurrency, commodities, or other units of value such as frequent flier miles or mobile minutes. Ripple purports to enable "secure, instantly and nearly free global financial transactions of any size with no chargebacks". The ledger employs the native cryptocurrency known as XRP.
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