Greg Kidd is the Cofounder of Hard Yaka and the Cofounder & CEO of GlobalID. Greg was an early investor in Ripple and XRP, he also served as the Chief Risk Officer at Ripple. He weighs on Jay Clayton and the SEC’s lawsuit against Ripple over the digital asset XRP being a security. Some of the topics discussed include:
1) Is he still holding & bullish on XRP
2) Brad Garlinghouse & Chris Larsen selling XRP
3) The SEC’s actions pre and post Jay Clayton
4) Can XRP holders sue the SEC over XRP losses 5) What happens next and what the XRP Community can do
Listen to the Podcast audio
Tony Edward: [00:00:10] Hi, everyone. Welcome back to the Thinking Crypto channel. I have a very special guest with me, Greg Kidd, who’s the co-founder of Hard Yakka, as well as the co-founder and CEO of GlobaliD. Greg, it’s a pleasure to have you.
Greg Kidd: Hey, Tony. Thanks for having me.
Tony Edward: Greg, I’m excited to talk to you. There’s a lot to uncover here, specifically the Ripple SEC lawsuit situation. But before we get there, I want to lay the foundation because I want folks to know who you are, and your investment background, how that led to your investment in Ripple. So, can you tell us about yourself? Where did you grow up? And how did you end up starting Hard Yakka?
Greg Kidd: Sure. I mean, I was an East Coaster big into bike racing, did a bunch of time at Booz Allen, and the usual management consulting shtick that got me into financial services and telecoms, got me around the world to like Asia and resident of Australia, New Zealand. I did a startup of all things in the bike messenger space that was based on free coal, kind of like Uber. I learned a lot about text messaging and payments. There’s a young kid named Jack Dorsey that hacked into that, he was very interested in dispatch. We took that company public like 20 years ago, I did some time back at — in Public Policy at the Kennedy School, went to work for the Federal Reserve in the payments group. That’s really where I got that regulatory background and a feeling of how Washington DC works, not just Silicon Valley and New York. [inaudible 00:01:41] Jack got a license as a massage therapist and came back out to work with me and he took those ideas that we had about text messaging just to bike messengers built a little company called Twitter, which I was fortunate to be around when he was in the backyard.
And then Square was a startup and other sort of an empowerment startup. Twitter was like the democratization of publishing Square was the democratization of who could take a payment. I continued on in the regulatory world working with Promontory and basically moonlighting with the startup space, and really got excited about who could actually issue money and create money. And that was the Satoshi revolution with Bitcoin. It wasn’t really a company to join until Ripple came along. And I just wanted to, I really didn’t care whether I was sweeping the streets or whatnot. But I did take that first roll, I think I was the 10th person at Ripple to be the first Risk Officer and hired the first compliance officer. Have been interested in the whole space and innovation in financial services. My particular shtick is how do you basically do the reg tech to make this stuff compliant so it can actually scale and in the world of law and order, rather than just in the fringes of the crypto shadows? And have worked a lot in the identity space since figured out how to make this something that would be empowering for people rather than a technology that gets captured by governments and corporations.
Tony Edward: Sure. So, a lot of investment background on your end and tell us about Hard Yakka, you’re the co-founder, how did that company come about?
Greg Kidd: So, Hard Yakka is just the money that we’ve made from just kind of my Forrest Gump lifestyle of having been around the beginning of Twitter and then Square then ripple. I was like in a Y Combinator class, and that this guy at lunch named Brian Armstrong, I think I wrote, if not the first, one of the first checks for Coinbase. There was this guy, Ron Bennett who had this concept of proof of stake and that became Filecoin. So, just was around for a bunch of the startups, just right place at the right time. And so some of the money that we’ve made from crypto, from Twitter, and Square, and all these other companies in the last 10 years, we’ve just put into a fund and just keep reinvesting. And the fund is it’s not a fund that’s aimed at financial investments. It’s a fund that’s aimed at this new view of the world, which is called The Sovereignty Stack where people are responsible for their own data. People, not companies or governments control their identities, looks at all the other opportunities and marketplaces, payments, etc, that come around that view of the world. So, it’s a very focused investment thesis. And so we pretty much stay close to our knitting. But that does involve everything to do with identity, to do with payments, and to do with marketplaces. So, that’s a really pretty big piece of GDP in the world.
Tony Edward: Got it. And it sounds like that led to the GlobaliD company that you co-founded, you’re also to see. Can you tell us about what the mission is of GlobaliD?
Greg Kidd: So, GlobaliD, it does for identity what DNS Network Solutions did for the World Wide Web. It took, like before the World Wide Web, the internet was just for governments and universities. With the World Wide Web, every website had a name and all you needed to know that it was the name to navigate. It wasn’t one name set for China and another for Brazil. There was a worldwide namespace that was for websites, we’re trying to do the same for identity. So, just like people have a handle on Twitter or Skype, you have an identity, you go out and collect easter eggs about your identity and you put it out there like a White Pages and Yellow Pages. Without revealing your private information, you can collect proofs from third parties as to whether your government ID is trusted, your bank accounts, your Twitter account, your email address, your phone number without actually revealing details about that. And so you want to be able to sign in with those credentials, just like you sign in with Facebook Connect. And of course, Facebook Connect is full of fake identities, and therefore, you get fake news. And it’s not a level of compliance that you could do like medical records both handle money, fire missiles.
And so we’re looking to create a level of identity and trust in an era where there’s a trust deficit where people can do those things, and yet be privacy-preserving and secure. And so that’s obviously really important for things like crypto wallets, or just plain old messaging. And so we’re really looking to build kind of what they have in China like WeChat. But without having like big brother looking over your shoulder. So, not big brother, not kind of like Mad Max telegram, like creepy Facebook, not like bureaucratic GDPR. We’re kind of like more like Star Trek, kind of empowerment kind of view of the world. So, that’s the investment thesis. We call it The Sovereignty Stack. But that drives the investments we’re making it and really the investments that we double down. So, we like things like the Brave Browser, or we like Filecoin, like, like the concept of a distributed Dropbox is an amazingly powerful concept. And so that’s like an example of something that we’re like all in on.
Tony Edward: Got it. And I’m assuming you’re using blockchain tech to have the respective data points merge or aggregate into the GlobaliD. And are you connected to like public databases? Or are you working with like the DMVs, and things like that yet?
Greg Kidd: So, we’re built on there’s a bunch of WC3 efforts out there around things like called sovereign and Indicio, and there’s a bunch of protocols. So, we’re based on those protocols has to do with what are called verifiable credentials, where your credentials are just floating around out there on a blockchain. And there’s a universal protocol that lets you get to those. And so we’re looking to move the identity stack to that, rather than be enclosed within like an apple or a Google or a Facebook kind of prison.
Tony Edward: Got it. Got it. A very much needed solution to your point of all a lot of problems that we find ourselves facing right now with data breaches, and fake news, and all of that. So, that’s very exciting. Any hints you can give to us about what may be coming this year around GlobaliD?
Greg Kidd: Well, I just think we’re just trying to make GlobaliD practical as an alternative to the Facebook view of the world. Like in the Facebook view of the world, I mean, it works. Like they’ve got messaging, and they’ve got — I mean, they’ve bought WhatsApp. And there’s other pieces out there like the Venmo. There’s like Zoom took off. But if you could think about what would happen if you could kind of like a little bit like what WeChat is doing, but again, not on such a top-down basis. Then you can take the best of what Zoom is plus WhatsApp plus Venmo, plus Eventbrite, and put that together so it can power individuals and groups, so they could run, I mean, basically their lives, their businesses, their organizations. But without having to turn to like Facebook groups to do it, that’s really what we’re doing. So, the pieces are out there. So, if you get GlobaliD, you can get all these pieces. It’s still kind of rudimentary, it doesn’t have feature parity yet with each of those platforms I’m talking about.
But we got to go from the level where we were at when I was at Twitter, and we had the fail whale coming up all the time. You could see the potential, but then that fail whale was up a lot. We got to fill in the functionality, knock out the bugs, and making a practical alternative to like Facebook and what they were going to do with Libra. Right now because all the big techs are kind of getting the knock for antitrust and kind of some of the abusive, coercive behavior they’ve done. There’s a bit of a window of opportunity for folks that are in the next tier to create something that isn’t dominated by the Big Five. But that doesn’t mean you don’t have to execute. So, 2021 is the year that got to pull these pieces together and make this practical, so people aren’t like, “Oh, that has potential,” to like, “Oh, I’d use that.” And in particular, get my 13-year-old daughter to use it without saying, “Dad, kind of interesting, but really, it sucks.” And unless you pay me to use this, I’m going back to Twitch or Discord or whatever 13-year-olds are on that are going to rule the world.
Tony Edward: Sure. I’m excited too. I’ve obviously followed you but I haven’t actually done anything along the lines of testing out or reading up as much on GlobaliD,, but very excited to test that out once you guys have some things up and running. So, I want to switch gears and of course talk about the topic at hand. And that is the Ripple SEC lawsuit. For the folks who are listening who may not know much about what’s going on or your background; you mentioned that you discovered Bitcoin and then you decided to invest in Ripple because it was a company that was actually tangible and attached to a respective digital asset and crypto. Tell us about what was the initial discovery around Ripple and how you help them in the early days as the Chief Risk Officer?
Greg Kidd: Sure. I mean, I thought Bitcoin was great, I bought a bunch of early Bitcoin, was really lucky to have done that. With Ripple, it looked like Bitcoin, but it had two additional columns in the spreadsheet if you will. One is other currencies, so you could put any sort of currency onto the ledger. And two, it had other issuers. So, in addition to there being an asset without a backer, which is like XRP and like Bitcoin, you could have other assets on that ledger. And so because there was a company to adjoin, and there was a use case, which is like, potentially replacing correspondent banking, it was something that you could just get your teeth into.
So, I did join as the Chief Risk Officer. Ironically, one of the first things I did was go to the US Treasury next door to the White House to explain to them about this new form of digital currency. And of course, that resulted in this whole investigation. And we actually picked up a sort of a small fine from FinCEN. They suggested we should have registered as a money service business. They ultimately decided that we didn’t need to, but they still gave us a fine anyways, because they think like, well, maybe you should, even though you didn’t need to. But anyways, we just settled. But we thought at the time that it was pretty much settled in 2015 that this was a currency since we went through this whole process with FinCEN. And you know, it got to be like a commodity too, because the IRS decided it was going to start taxing just like they tax other commodities. And so every time I spent XRP, or Bitcoin on my Coinbase card, which one of my companies was the first one to issue that card, [inaudible 00:12:40] had I capital gain or capital loss and a cup of coffee.
I’m like, Okay. This is like in physics and physics things can’t be a gas, a solid and liquid all at the same time. But right now, and we’re already like a gas and a liquid and soon to be found, now, seven years later, the SEC wants us to be a security or be a solid as well. And so this concept that you can be everything. I mean, the only thing that hasn’t weighed in yet is the CFTC making us into a derivative is that cascade of responsibilities without any coordination of the regulators was beginning to start to cloud the horizon. And so it’s hard enough to please one regulator, but it’s very hard to please regulators that are having turf battles between one another. And so got an early preview of that all the way back in 2015.
Tony Edward: So, is that the disconnect that there’s a power play between the different government divisions, because to your point, FinCEN said it’s a virtual currency, We’ve seen documents and things along those lines from the government. So, what’s going on here? Is it a Jay Clayton thing, his preference, or is this once again, the power play between the different divisions?
Greg Kidd: Well, yeah. It’s kind of like inside baseball. I’m not on the inside anymore. I’m on the outside looking in, but obviously, back when I was at the Fed, there’s sort of like a turf battle between what does the Fed control versus the OCC. There’s like State National Bank Charters and bank holding companies. And then there’s a tug of war between like the OCC and the state regulators. People want a bank charter so they don’t have to do 50 exams with 50 different state regulators. But there’s also competition between like, what’s a currency, what’s a security, what’s a commodity, and who gets to be the boss of what? And so that plays out. Independent of that, there’s just an overall level of paranoia in government. There’s a Nobel Prize Winning Economist, Hayek, who wrote a book back in the 1970s, called The Denationalization of Money or the concept of private currencies. And so the thought that sovereign governments would lose their monopoly control of currencies to private companies or organizations that are amorphous like Bitcoin, scares some people.
And so it’s been pretty clear that the Trump administration, Mr. Trump did not like anything that challenged the hegemony of the US dollar. And so crypto kind of fell into that category. And so there has been from the last administration, just both a lack of understanding, but also a fear of something that they just didn’t control. And so there’s been no sort of scuttlebutt of like, “Well, how do you take crypto down a notch? And again, I’m not inside anymore. I don’t know who’s got like what agenda, but it’s been pretty clear that this is 2020. And I started at Rippe in 2013. It’s not like this, just like materialized. This thing has been on a roll for seven years. And if somebody had something to say, they probably could have said it, rather than saying it on the last day of their tenure at the SEC. Like that wouldn’t happen at the Fed. You wouldn’t have like some head of the Fed launched some big piece of litigation and then like, say, “Goodbye, guys” the next day, 30 days before a new administration is coming. That’s not the Fed I worked at.
Tony Edward: Yeah, that seemed like a very crass move, like an unprofessional move, in my opinion. Yes, understand that the SEC has their job to do. But to do that on your way out, and then you’re gone, something doesn’t seem right, it doesn’t sit well. So, I’m wondering what you as an investor in Ripple, and the other investors and even the folks at Ripple are like. Were they like, surprised? It seemed like a sucker punch move. What’s the feeling and vibe around?
Greg Kidd: I mean, look, I hold Ripple stock, I hold XRP. I hold XRP. Personally, I hold XRP in our investment portfolio, I invest in companies that are exchanges that deal with XRP. They also deal with all the other — I mean, like I’m deep in all these different cryptocurrencies. But essentially, when I read the filing, I realized the filing thinks I’m the victim, right? Because I’m like invested in all this stuff. And what it basically says is like you Greg don’t know the difference between a gold mine and gold, right? Like, there’s a Ripple security and then there’s an XRP currency. And like I invested in both, and it’s sort of saying, Greg, you are confused, you didn’t really understand that you could buy a bar of gold and the gold might do well, but the gold mine might fail or you could have the gold mine doing very well, even though the price of gold is falling because it’s a very efficient gold.
The fundamental presumption under the lawsuit is that after seven years, investors are confused, idiots, or both. And that there was a famous saying that Ronald Reagan had about like, the most terrifying words in the English language is, “I’m from the government and I’m here to help.” And so like, the concept that the SEC is going to help us, investors, by giving us our 1.3 billion back while destroying 10 to $20 billion of value like, to you guys, thanks a lot. And if you read the primary mission of the SEC, the number one mission of the SEC is the lookout for investors. And so like that kind of aid get me back, $1 and 10. Like, that’s not helping me. And like why you waited seven years to do that and make that decision and still have not laid out the principles that would explain well, how’s this going to apply to Stellar or Filecoin or Brave or any of the other tokens out there? Why did Metallic and Ether got like off the hook? What, because they did a [inaudible 00:19:00]
The lack of principles, the lack of rules of the game, it feels to me like I don’t know who won the 2013 Super Bowl, but it feels like today’s refs are going to go back and relook at their tapes and say that call wasn’t right. We’re going to reward and assign a new victor for the Super Bowl in 2013. And so I don’t understand why this is happening in 2020, especially after the run-up to like the launch of the Flare Network and the Spark Token. If you were going to be upset about some new token coming out, kind of like at the timing they had when they went after Kik or Telegram, that would be the time to do it. Not after the fact. What, were you busy with thanksgiving dinner? Like you just didn’t get around to doing the filing until the day before you’re going to resign? I mean, what the hell is that? About that just not how I’ve ever seen — I mean, even regulators in sort of tinpot countries have a little bit more class than to pull something like that on the way out the door.
Tony Edward: So, I’m going to ask a question, and it may seem a bit silly, but of course, the community wanted to know about this. The SEC supposed to protect investors, they do this wiping out billions in value hurting the actual investors now, but you’re probably in the millions, if not the billions. Do the actual holders of XRP have a case against the SEC? Can they sue the SEC? Is there anything like that?
Greg Kidd: Well, okay. It’s America. Everybody can sue everybody. That’s one of the things about America. I mean, it depends on how much joy you get and like, what the point out of that is. So, look, I’ve been involved in some litigations in my life, and I’ve got my ass in a bunch of times too. But in America, sometimes you have to litigate to innovate. And in this case, it might be you have to litigate to protect innovation. Like I’ve seen, there’s some new litigation already from claimants that hold XRP and feel like they’ve been hard done by this. There’s a bunch of different angles to come at this from. Suing a regulator is never a great strategy because if you lose, you lose, and if you win you have — It’s kind of like, wow, I poked that hornet’s nest and it fell off the tree, I win. I’m like, well, maybe that’s not so good. The regulators, even if they lose on the rules, they can always change the rules, and they have a memory. And basically, one of the key things is don’t hire a law firm that knows just the law, and is really smart about the lawyering. You got to hire a regulator or an advisor that knows what the tone is of the regulator. So, really, I’m not here to like, irritate or piss the SEC off. I want the SEC to go back, read its mission statement, take it to heart and execute again.
So, all we’re asking for is clarity on the rules and fair application of the rules across all the different sectors. Obviously, I think it’s a terrible thing if you can’t differentiate between a gold mine and gold. If you tell people that holding gold is something that only accredited investors can do or a gold mine can only like, have this thing out there once they go public, right? Like that’s a terrible outcome for innovation. Also, if you go back, there’s this thing called the Howey test from 1946. And it’s really about fruit trees, and whether a farmer can sell fruit trees, and whether the people that buy the fruit tree lots then have the farmer take care of them for him. Like, if you think that’s what’s happening between Ripple and XRP, you haven’t been to a fruit tree farm. You know, it’s a real big stretch of the imagination. And so look, I think some of the folks from Ripple said it right is like, in this case, if you look at the law, if you look at the facts, and if you look at history, this thing is out of left field. All right.
So, the lawsuit is less about winning the lawsuit. It’s more about getting people woken up, including Congress, or the people that are the ones that set the guardrails for the SEC. This is what you have the authority to do, this is what you don’t have the authority to do. Don’t be going and like shagging somebody else’s authority because you feel like if you don’t, you’re not going to get a chance to be the boss of crypto. Right? And so kind of that’s what really is, for me, at stake here. I think it’s a real stretch if you’re going to call XRP a security and then not like trash the rest of the industry. That’s like a bad outcome on almost every level. But the question is like, Okay. What needs to be done here is there needs to be greater transparency, if you don’t think Ripple did the right transparency or somebody else. But just say what it is, regardless of whether it’s a security or not. Forget about the turf battle. What’s the best thing for investors? Was there anything that happened? I mean, if you read the ruling, there’s no accusation of fraud. There’s not anything uncovered. All they went back through is all the public events of the last seven years and they sprinkled Twinkle dust on it and said, “Yeah, it’s not a currency. It’s not a commodity. It’s a security seven years later.”
And last time I looked, in the United States of America, Ex Post Facto laws are unconstitutional. Unless you watch Back to the Future when there’s a time machine and you can go back, and reimagine and re-execute all this stuff from seven years ago, you can’t be changing the law seven years after the fact. You can provide new rules, new guidelines to help people figure out what to do going forward. But this retroactive, tarring and feathering [inaudible 00:25:28] say it’s not kosher. It’s not American it’s just not the way to do things. But that’s the reality we’re dealing with.
Tony Edward: Sure. So, how do you see this playing out? And I know you’re not a lawyer. And obviously, there’s going to be a bit of speculating to see how things play out. Do you see this being a long drawn-out process? Or maybe the pressure of the crypto market, the players that are in here now; I know Ripple has had some congressmen like Tom Emmer come out publicly say XRP is not a security. Do you see some sort of settlement soon, whether XRP security or not, depending on the SEC, what they decide to do?
Greg Kidd: I don’t know what’s going to happen. This is one of the things that is become more troubling about the country I’m living in, the United States. I used to feel like it was good that it was kind of boring. But like, now things happen that just surprise me. That if I went back, like, four years ago, and people told me this, and this would happen, I would say, one in a million chance. But I just don’t know. Like what I do know is that a settlement that makes Ripple or any of these other currencies into a security is kind of like a deathblow. Because in our country securities can’t be held by non-accredited investors. And that just means that the whole ledger system, unless you’re going to keep track of who is and isn’t an accredited investor all around the world, is problematic.
And this particular challenge is this concept of accredited investors and who can and can’t do something, it’s a particular American concept, but we apply it with extraterritoriality to other countries. So, even if Ripple wanted to leave America, I’m like that ain’t going to work. I mean, Telegram wasn’t here, and the SEC was still going to, like, mess them up, because anywhere they got on a plane if the long arm of the law said, like pull that person off the plane and extradite them to the US, it doesn’t matter if you’re not in the US, if you do something that America doesn’t like, they’re going to mess you up. And so it’s a terminator thing. You can run but you can’t hide. And so I don’t know. And that’s probably the worst thing of all. And it’s also the worst reason to file an enforcement action without actually having given guidance on what rules are. So, you have to litigate, to find out like, what the rules are. And that is, from my point of view, the worst form of regulatory infrastructure that you can have is regulation by enforcement action.
Tony Edward: Sure. And I saw Ripple’s General Counsel, Stu Alderoty talk about — it sounds like given the factors that SEC sat on their hands for seven years, FinCEN had its own ruling, a lot of investors are hurt as a result, we could potentially get a Howey test 2.0 or what may be called a Ripple test. Do you feel Ripple has the ammunition, so to speak, to really fight this out? Obviously, I know it’s a difficult question. You’re invested, you have skin in the game. What are your thoughts? Are things looking good, maybe it’s 50/50, hard to tell?
Greg Kidd: This is kind of the tough thing when you have like — If you look at the two settlements that came before with Kik, and with Telegram, Kik ended up paying like 5 million, Telegram ended up paying 18.5 million and they basically just agreed to call their things securities and to like not do it anymore. And yet there wasn’t any clear principles established. And so it’s like a world where the big tech companies are getting these fines and they’re just like, eh, eh, eh. They’re like yeah, I’ll just factor that into my monopoly pricing and I’ll earn it back but it’s not changing the basic power structure or mindset of the companies. It’s not actually doing any innovation in our regulatory environments. It’s not providing clarity. What it is, it’s kind of like a Tony Soprano world. He takes his piece, and then he kind of goes away. And it’s almost as if the SEC is treating it like ambulance chasing. We shut these companies down, we made more money than it cost us to prosecute the case. So, therefore, we’re not costing the taxpayers any money. And the collateral damage of the uncertainty that’s created, the loss of innovation, the loss of competition in the marketplace, just the general just chaos of not knowing is — that’s not like their problem.
And so we don’t want a settlement like that for Ripple. And so I hope Ripple because they already have the XRP out versus like, for a long time, unlike Kik or Telegram, it’s kind of maybe more of a fight to the death because the horses out of the barn and it’s been out there for seven years. And essentially what the SEC is trying to do is take a roomful of toothpaste and put it back into a toothpaste tube, right? And there’s no way it’s going to happen. There’s nothing in the SEC’s case, that suggests that they’re at all solution-oriented. They’re not trying to figure out a solution to a problem. They’re just trying to create a problem, and possibly shake somebody down to like, make that problem go away. And that is a very unfortunate pattern for our country to be in. And it’s a very tough thing to pass on to the next administration. I have no idea where the administration is going to come out on this, who the next chairman of commission is. But you don’t just want to like when you inherit this thing, it’s kind of embarrassing, just to say this thing was like some somebody’s personal vendetta or was a blatantly political type thing that wasn’t grounded in facts, history, or law. Because that in itself also undermines the credibility of the regulatory institutions.
Tony Edward: And Greg, what seems odd, you mentioned that anything that challenges the US dollar’s dominance, so to speak, but yet, they’ve gone after Ripple. And obviously, there’s going to be other companies in the crypto market that they’re probably going to go after. But why leave Bitcoin when that has the largest market capitalization and seems to be more of a threat?
Greg Kidd: Well, you got to find Satoshi to shake him down [inaudible 00:32:45] knows where he is.
Tony Edward: But even they haven’t taken the respective steps, though. I mean, you would think and we saw Trump tweet that anti-Bitcoin, not currency, etc, etc. But they still let it flourish. So, something’s not adding up. And I don’t know if you know the answer, or it’s just we don’t know what’s going on right now.
Greg Kidd: Well, it’s hard to — I mean, Bitcoin and these other things, like, and even if they destroy Ripple, I mean, the XRP ledger will still be around. And you can kind of mess with Americans and people, but to some extent, the beauty of these systems is their innovation without asking permission. And Ripple was just the easiest, biggest party to shakedown. Right? And plus, I mean, their personalities, and there are other particular circumstances. But that there’s no one to go after with Bitcoin, right? Like you can’t. — At the end of the day, this trend is essentially an unstoppable trend because blockchain happens without having to ask permission. It may not be the most efficient technology in the world. But because it’s permissionless, it allows a type of innovation that previously in a regulated industry all innovations were started with, “Please sir, can I fill in the blank?” And that, you have to ask yourself, is it really innovation if you have to ask permission?
And so there’s really a sort of an unstoppable engine with Bitcoin and Ether because there is no one to shakedown. Early on with Ether you could have like before, but it got away, right? And they’re kind of like saying like before XRP gets away anymore, we still have some people that we can really put the hammer on, right and show that we can — And it’s kind of like a shot across the bow to all these other companies, these great technologies that are coming up. Like Filecoin and their ICO, they raised 200 million bucks in like an hour. And they took that and they built the scheme. I mean, come on, I love Filecoin. Like, I love the concept that it could be a distributed database where we’re all storing our data on one another. And there’s like a collective, like repository of all the different versions of everything, and its content is served quickly. And my gosh, here’s a direct shot across their bow. Is Filecoin a security? Right? Like why wouldn’t it be if you believe this kind of logic? And I think that logic is absolutely absurd because I can tell the difference between gold and a gold mine.
Tony Edward: Sure. Yeah. The miner who’s mining Bitcoin versus the natural Bitcoin, yeah.
Greg Kidd: Yeah. Like it’s a different thing. And if you really want to make those mine and the people that are selling shares on that, that’s fine. I get that. But, I mean, look, it’s no different whether you’re building — it’s like saying, I bought a Ferrari. I think it might go up in value if Ferrari wins at Le Mans. Okay. That doesn’t make buying a Ferrari an investment contract and a security. Okay. It might go up in value. Yes, Ferrari has control over how well they do that. But you know, come on, like fruit trees, Ferraris, gold, somewhere, you’ve got to start applying common sense, as opposed to using uncommon sense to get to some sort of political outcome that serves some political agenda.
Tony Edward: Sure. Now, I’ve heard Ripple’s CEO, Brad Garlinghouse in multiple interviews, talk about a lot of the conversations he’s had in the United States with maybe different banks and companies, and so on and so forth. It’s always been the roadblock of well, we don’t know what the declaration of XRP is. So, let’s say this case plays out, and it’s just a hypothetical scenario that okay, it is deemed as a security, Ripple pays a fine. I think I remember Brad saying that would then require the extra step of companies to have broker dealer licenses. So, do you see a scenario where, okay, this thing comes to a settlement, XRP is declared a security, and these banks and whoever payments service providers are able to then leverage any Ripple ODL because maybe they eventually get the broker deal licenses?
Greg Kidd: Yeah, and it’s complicated or, first of all, that’s a split decision. Virtually, every other regulator in the world — no one else has, through their independent process come to the same conclusion as Jay Clayton at the SEC. Like nobody else thinks it’s a security. Until you get a two-tier world where XRP is still trading out there in all these other countries not as a security. And then it gets to the US and it suddenly morphs into a security. Yeah, yeah. Firms can get a security, but it’s just such a gluggy thing. The simplicity in most things like whether it’s Square, or Twitter, or Bitcoin is like a seminal part of the value proposition.
If you’re going to make it complicated so everything else is a duck and when it’s in the US, it’s a cow, and people are going to try to use that as a better alternative to like Swift, or I’m going to try to use that for like a rewards currency. Or MoneyGrams going to — like, highly unlikely that that kind of cluster arrangement is going to be workable. And so that kind of goes back once again, it’s like, “Hey, look, I’m from the government, and I’m here to help.” And if that’s the helping that they’re going to do, and they think that that somehow goes back to the mission; what’s the mission? The mission is investors, the mission is efficiency, the mission is fairness. And the last part of the mission is capital formation. You think capital is going to form around that as opposed to something else, it’s just simpler. The world tends toward simple and they’re going to make it complicated, that’s kind of — like, I don’t know what kind of settlement that is.
Tony Edward: Sure. A question I want to ask you, and I know the conspiracy theorists are going to go nuts about this one, but it’s based on facts. Look, we’ve seen Brad meet with the IMF, shared the stage of Ross [inaudible 00:39:37], and a few other people. Given the respective connections to central banks and the IMF and so forth; do you feel that could help apply pressure to the US government to move in the right direction? Specifically, the SEC? I know it’s an open-ended question I just asked.
Greg Kidd: I just have seen that the US, they have this thing like, was it the Governor of New York to talk about this thing about, what do you say when your daughter brings a boyfriend, and you always like the boyfriend. Because if you don’t say you like the boyfriend, she’s just going to like him more. And if you like him, you like him. So, it’s very hard to tell the US anything. And if you try to tell the US anything, the US has a long history of then just doubling down and doing the opposite of like what the world wants. That’s why it’s always been hard to get the US to go along, and everything from like, climate accords to like control of nuclear weapons, to anything that requires coordination, that doesn’t recognize that somehow the US is special, and that we don’t have to follow the rules that others do, and that our rules can apply in other countries, but nobody else’s rules can apply to us, that’s a tough sell both for Democrats and Republicans.
There’s still a concept of American exceptionalism despite our shrinking role of GDP and our shrinking leadership in the world. I don’t see us, unless we can figure this one out ourselves. Even if everybody else was kind of like giving us a hint as to what the answer is, America has a very hard time with not-invented-here type solutions. So, I wish maybe with the Biden demonstration that’ll change some. But it hasn’t been a big feature of either of our political regimes, whether liberals or conservatives in the United States so far. I love the country. But man, it’s painful being an American and being around foreigners, that just — they used to just kind of feel we were kind of arrogant, but now they just kind of feel sorry for us.
Tony Edward: Yeah, I’ve noticed that sentiment change in the direction you mentioned. So, I want to ask a very touchy subject here, and as much as you can talk about it. And personally, and this goes to Brad and Chris’s holdings of XRP. Some folks are a bit taken back about what was disclosed in the lawsuit of, okay, they sold some XRP. I personally don’t see a problem with that, because like anybody else, they hold XRP, you hold XRP, I hold XRP, I could sell. Now, obviously, given the overarching theme of what’s happening here, people have been emotionally worked up about it. And do you feel they are going to get fined personally outside of the company? Or maybe it’s them taking a step back that would help resolve this? I hope you [inaudible 00:42:38]
Greg Kidd: Well, it’s funny, in the whole case, there’s no accusation or even implication that there was any fraud, right? And so the interesting thing is, if you go back to the early founder days of Ripple, the founders kept 20% of the currency, and they gave 80% of it away. Think about what happens with startup companies, founders usually keep 80% and give 20% away. And so we’re in this funny kind of world that it’s sort of an embarrassment of riches; Chris, and then later on Brad and a bunch of folks. And look, I got in on the wagon pretty early, took a relatively small percentage relative to what happens with equity type situations. And it just did so well that they did really well. Now, of course, people that have had that inverse position that have had equity in companies, whether it was Facebook or Square, or Amazon have done even better, right? But it’s been equity, not currency. And somehow our mindsets are trying to be like — our emotions are trying to be fed by the narratives that like, look how well Chris and Brad did. So, get out the pitchforks and go after them because they did so well. And maybe you don’t like the kind of suits that Brad wears, but who cares?
Like, at the end of the day, it could be Chris or Brad, it could be you or me, somebody does well, and somebody’s unhappy about that. But once again, most of the accusations, especially leveled against Brad are for all the things he said in public. It’s not like he said one thing in public and another thing in private. It’s just like, “Oh, my gosh, you just said that in public on CNBC.” And it’s not that he said something that wasn’t true. You know, like, when Brad sells a lot of XRP and he says, he’s long in XRP. That’s like me, too. Like, I don’t want to have all my net worth in one asset. I mean, I did the same thing with Twitter, with Square. Just because I sell it doesn’t mean I’m not still like long in it. And it doesn’t mean I don’t have confidence in the company. But I’ve been someone who didn’t take something off the table when I took my first company public. And I basically, I think, all I got out of that IPO was a T-shirt and a bicycle. So, I tell everybody, I don’t care if you’re the founder of the company, if you don’t sell some of what you’ve done, you’re an idiot. You will lose your objectivity, your ability to separate yourself from the company. Take something off the table so that you can have perspective.
And so it’s really the argument that Chris and Brad did too well, versus like, what Zuckerberg and Bezos did or like how Elon’s doing at Tesla. I mean, we can have those kinds of lawsuits, which is like you just made too much money, or you sold too big of your stake or like, whatever. But that’s not even a legal issue. That’s just like a public relations issue, as far as I can tell. And so, that, to me, is just noise to throw everybody off the real issue, which is can people tell the difference between a gold mine and a gold coin? Right? And if they can’t and you need mother nanny to tell you that everything you ever bought and did you need to like turn back in because you didn’t understand what you were doing, even though that’s going to like, wipe you out. Okay. That’s the dystopian America we live in. I’m ultimately an optimist when these types of things happen. To me, it’s always a chance for clarity, and I hope that our system will self-correct around this. I still just can’t believe it was so blatant that it happened on the last day of somebody’s administration. And they didn’t even let the incoming administration consult or be involved in the — They purposely isolated the eyes that would have come in of the folks that are going to take over and have to carry this thing on. I mean, it was just completely unprecedented that that could or would happen.
Tony Edward: Yeah. It’s just, I think, just a weird situation. And like I said, a crass move. And I have to ask, Are you still holding XRP, and are you still bullish?
Greg Kidd: Yeah, I have a ton of XRP. I mean, I have a lot of crypto. I have a lot, a lot, a lot of stuff just because I mean, I just — I don’t know. It doesn’t take that much to keep me in bikes and meat pies. So, yeah, like I am selling basically just enough to invest in the next generation of things coming along. And I’ve always done that. So, for instance, I don’t own Twitter shares anymore, not because I don’t think Twitter’s an interesting company but there’s just nothing — The financial dimension of Twitter is kind of like played out. Square is still kind of on a rocket ship so I have some Square shares. But like, for me, those are part of my history.
And my future is like, oddly enough, I’m not buying more Bitcoin or buying more XRP. Not because I think they’re bad investments, just that my interest is in, like, what are the new innovations coming out? So, I’m really interested, for instance, in what Flare is going to do or how is Filecoin going to play out or what, what’s going to happen with Brave if they really do become like a challenger to like Google. Like it’s just the next thing to me because all this to me is just like after school. Like, I’m not in school anymore, so this is the school and these younger folks that are coming along with the next generation of ideas, they’re our school teachers. And our job is to make sure we sell some of the stuff to make sure there’s milk in the fridge for the next generation.
Tony Edward: Sure. And I love that. I mean, to your point, you’re an investor, you’re taking profits, but you’re also reinvesting to the new up-and-coming technology or disruptive technology. So, on the note of Flare, what are your thoughts on that? Obviously, the Spark token distribution coming sometime this year. And the additional use case that brings, I guess, to the XRP ledger, if you want to put it that way.
Greg Kidd: Well, and again, this is maybe — people may not believe this history, but like there’s a Stephane Thomas who used to be the CTO. Like he had the concept of smart contracts. Like he was working on it before Ether got it off the ground. And there was a talk about doing and making the next big push for Ripple would be in smart contracts as opposed to like what it came as like a payment solution alternative to like Swift and correspondent bank. I personally wanted Ripple to go more in the direction of identity. But Ripple made the decision to go in the direction it went and it put aside the opportunity on smart contracts. And Ether took that up and it’s been really impressive. And so it’s always been curious to me, what would the XRP ledger be like, if it had a smart contract layer built over on top of it, given that it’s just much more efficient than Ether.
And maybe Ether now would move into like proof of [inaudible 00:50:16] from proof of work will be more efficient and stuff. But I like that it’s game on and I just want a seat to the rodeo. So, I’m game and I made sure to get a pretty big holding. I’m probably part of the responsibility for that run-up of the XRP price to be part of the — on that December 12 cutoff date, I want to make sure I got some tickets to the rodeo. So, I’m a ticket to the rodeo kind of guy. It served me well before. I know that sounds like fear of missing out, but I hope I’m Forrest Gump, got an early seat at the rodeo before everybody else knows there’s a rodeo. But I have to admit, I wasn’t like first to the party for Flare. I was kind of late to the party. But, you know, better late than never.
Tony Edward: Sure, sure. Yeah. And I think I remember, yeah, the Stephen Thomas work and I know Vitalik was around those circles at that time. And I think was Codius as I think was the smart contract — [crosstalk]
Greg Kidd: It was Codious, you’re right. Now you’ve done your research.
Tony Edward: So, Greg, I’ve asked a plethora of questions to you about this and I wonder if you had any final statements around this situation to maybe the XRP holders. Anything that you would want to say given the situation that I may not have covered?
Greg Kidd: I’d just say that the XRP holders should just speak up as XRP holders that this is not a Ripple issue. It’s like an XRP issue that there is an XRP community it is related to but distinct and different from the Ripple community. And I think that the regulators need to hear loud and clear that the people that bought XRP we’re not idiots. We didn’t like not know or think that we were buying Ripple. We actually understood the difference between gold and a gold mine. And we appreciate people looking out for us to help us get better disclosure of what’s going on. We don’t like insider trading and things like that. There haven’t been any accusations of that. But if you’re going to help us do so like referees help an NFL Super Bowl game, not like Tony Soprano helps at a construction project. Okay?
Do it for us like the way we like to see like a fair, efficient, competitive arena, not like a smoke-filled dark room. Like, help us rebuild the trust deficit in our regulatory regimes. Speak up for clarity, like that’s what investors want. We’ll make our own decisions as to whether we’re going to like vote with our feet, walk to, or walk away from a product. But please don’t like., do our thinking for us. And so Speak up. And whether you’re writing letters to your congressman, or you’re getting involved in the lawsuits, let folks in the regulatory community, let folks in the public policy community know that there is a place for innovation here in the United States. And like we don’t want to operate in a world of Ex Post Facto laws where we had seven years into something and then we want to jump into the time machine. We don’t need that. We’re willing to take our lumps, we’re not a bunch of widows and orphans. And let us have our game.
Tony Edward: Sure. Sure. And I’ve already started to see folks in the community, the XRP community contacting different congressmen, and congresswomen, and different folks, regulators, and so forth. They’re getting a tweetstorm. So, that’s a great call to action and we’re hoping things play out well. Of course, I know, February 21, or 22nd is the initial hearing, and hopefully, things move in the right direction. So, Greg, I want to wrap it up with some quick rapid-fire questions such as, what’s your favorite food?
Greg Kidd: I do have a hankering for cherry pie and the really bad stuff that comes with the canned cherries with the processed stuff. And I know I shouldn’t say it but it’s that processed sugar buzz, it’s better than even cocaine. Sorry.
Tony Edward: What’s your favorite musician or band?
Greg Kidd: So, I still like that song from Coldplay, “I sweep the streets I used to own” and that feels like for me, when I have my down days. I feel like I’m going to be sweeping the streets I used to own. So, I play that to cheer me up a little bit.
Tony Edward: Viva La Vida, if I’m not mistaken?
Greg Kidd: Viva La Vida, yeah.
Tony Edward: Awesome. What’s your favorite movie?
Greg Kidd: Well, on movies, I just — I have to recommend Booksmart. If you haven’t seen it, it’s kind of like the Heathers or Breakfast Club of this generation. Every model and that is a positive role model. And the son of one of my money guy in this is one of the key characters in that. But it’s a movie of confidence in the generation that is in high school going to college today. I do have high hopes that our kids are going to do better than our current generation has done for the planet. Because we haven’t done very well anything from global warming to like financial regulation to the pandemic. I’m kind of embarrassed how history is going to look at our generation’s handling of those issues. Booksmart.
Tony Edward: Sure. Booksmart, definitely have to check that one out. So, I know you love biking. Is that your go-to hobby or is there anything else that you do in your downtime?
Greg Kidd: We’ve been doing a lot of riding. We took the team we did the Johannesburg to Durban race last year [inaudible 00:56:10] from the tip of New Zealand, top to bottom 3,000 kilometers. Those are all good rides. I put in a plug for the trans-Alps from Germany down to the Mediterranean. That’s a great race too. So, we do like those races for team building. And if you can get through those, you probably can get through one of these crypto losses.
Tony Edward: Well put. Greg, learned so much today. Thank you so much for joining us. Really appreciate it, and we’ll love to have you back on in the future as things progress.
Greg Kidd: Thanks for your time today. Take care, Tony. [00:56:47]