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Ripple makes ripples with new Liquidity Hub in wake of regulatory issues

The broadening remit for digital assets and the technology that underpins them is making itself known loud and clear once again.

Ripple, which is a real-time gross settlement system and remittance network based payment protocol, is wading into new waters and launching its new Liquidity Hub service which will mean that financial services companies will be able to provide access to cryptocurrencies for their customers.

The company, based in San Francisco, is marketing the new service as a method by which enterprise clients can gain access to digital assets from various sources including via cryptocurrency exchanges, market makers and OTC trading venues.

This is a particularly bold step, and perhaps an interesting one given that Ripple has managed to attract the attention of the US Securities and Exchange Commission (SEC) which is one of the world’s most stringent and well organized financial markets and derivatives trading venue regulatory authorities.

Just a a few years ago, Ripple was the subject of a wrangling with the SEC over what the regulator saw as the provision of an unregulated securities product.

In terms of background, the initial step came in the form of a a class action lawsuit that was filed against Ripple in May 2018 stating that Ripple had led a scheme to raise hundreds of millions of dollars through unregistered sales of its XRP tokens.

According to the complaint, “the company created billions of coins ‘out of thin air’ and then profited by selling them to the public in ‘what is essentially a never-ending initial coin offering’.

Subsequently, the SEC then commenced legal proceedings against Ripple Labs, along with its CEO Brad Garlinghouse and co-founder Chris Larsen on December 21, 2020, for allegedly selling unregistered securities.

In the lawsuit, the SEC claimed that XRP was a security instead of a commodity, because it was generated and distributed by Ripple Labs in a centralized fashion and was not being adopted by financial institutions for its advertised use cases. The SEC stated that Ripple executives sold 14.6 billion units of XRP for more than $1.38 billion to fund the company’s operations and enrich themselves, to which Mr Garlinghouse responded by criticizing the SEC and indicated that Ripple Labs would defend itself in court.

Now, less than a year later, the company is embarking on a bold attempt to offer a fully fledged service to financial services companies which could well fall under the remit of regulatory oversight and is doing so against the backdrop of this contretemps with the SEC.

It is absolutely clear that regulation and adherence to regulation within the cryptocurrency world is paramount and is a vital means of maintaining sustainability for the growth of cryptocurrency and the digital asset based decentralized financial services structure which will empower the future of millions of businesses and individuals globally.

On this basis, CoinMetro was established with regulation at the forefront of its ideology and entered the market as a regulated exchange. This means that from the outset, CoinMetro’s technology, method of operating and exchange platform have been built with regulation in mind, therefore ensuring that as the company builds out further and increases its product range as the decentralized financial services (DeFi) world becomes more and more comprehensive, CoinMetro’s product will always provide a sustainable method of operating in all areas of the cryptocurrency sphere.

When handling corporate treasury for small to medium-sized businesses in cryptocurrency assets, for example, which is a service CoinMetro offers its business customers, adhering to financial regulations is instrumental, as companies using these services have fiduciary duties toward their stakeholders and customers.

Additionally, in accessing cryptocurrency liquidity for providing a holistic trading environment via the cryptocurrency exchange, regulation is equally paramount as large liquidity providers will want to see regulatory credentials in order to satisfy their compliance remit, therefore the best liquidity providers will work only with regulated exchanges.

It is always best practice to enter a specific market with full regulation, and given that CoinMetro has plans within the next year to establish a Multi-lateral Trading Facility (MTF) and is already a regulated e-money provider with an EMI license as well as being a regulated cryptocurrency exchange, this host of channels and services combined with full regulation from the outset makes CoinMetro a veritable contender for challenger banks.

Our very own native token, XCM is now very much alive and the staking process has begun. This is the way forward.

As with everything in life, the only way is to do things properly from the outset.