Ripple: Big Long-Term Challenges

In the near term, the Ripple token (XRP) is not a bad investment.

It has good trading volume. Its lower-than-average volatility can help add some stability to a diversified crypto portfolio.

As the entire space recovers, investors can make good money.

And as I wrote here on March 2, our Weiss Cryptocurrency Ratings model gives it credit for all of these strengths.

What puzzles me, though, is how XRP owners can hope to profit from Ripple’s long-term trajectory.

Here are the twin dilemmas that investors face:

Dilemma #1. The company’s big mission right now is to make deals with banks and other financial institutions. “Use our blockchain technology,” goes the pitch, “and we’ll help you transfer any currency to any other institution faster and cheaper.”

Sounds good, right? The problem is all those bank deals have little to do with XRP. They don’t need XRP for those transactions. They’re all going from fiat to fiat.

In fact, a whole new set of tokens will be issued for each fiat currency, much like gold trusts or funds issue shares of gold. This process, called “tokenizing,” bypasses the need to use the XRP token in the first place.

In fact, Ripple will “tokenize” the currencies and completely bypass the need to use the XRP token in the first place.

Result: XRP owners could be left out in the cold.

Dilemma #2. Ripple is not a public company. So there are no Ripple shares to buy.

Could it make inroads into the banking industry? Could it generate good earnings? Perhaps. But again, that has nothing to do with XRP.

I repeat: XRP is not needed for the bank-to-bank transaction business. Nor does it entitle owners to any share of the company’s earnings. For that, investors are going to have to wait for an Initial Public Offering.

Technology vs. Governments

If you think governments might try to push back against other cryptocurrencies, then you’ve got to think they’re going to be a stone brick wall blocking the expansion of Ripple.

I repeat: Ripple is going after the business of traditional financial institutions that are deeply embedded in a world controlled by governments and supranational institutions.

Like the International Monetary Fund, World Bank or Bank of International Settlements.

These guys are essentially inseparable. They’re a chummy, elite club. And what about the revolving door between regulators and financial institutions? It’s in full swing, with round-the-clock staff swapping parties.

And never forget, after 2008 the too-big-to-fail megabanks made a solemn pact with governments: “You guarantee our survival,” said the bank CEOs to the Treasury officials. “You protect our oligopolies and monopolies. And we consent to heavy-duty scrutiny and regulation.

“Oh, and one more thing,” said the bankers and bond dealers. “Next time around, when push comes to shove, we think you’re going to need us to market your big debts more than we’re going to need you to bail us out.”

How does this all relate to Ripple? Well, it would be a relatively trivial task for governments to shut XRP down.

Heck, if XRP is perceived as a direct threat to their interests, what would it take for them to forbid all financial institutions under their thumb from using the token?

A lot less than it would take to forbid decentralized cryptocurrencies whose users are not under their thumb! In fact, it’s safe to say that banning decentralized cryptocurrencies would be almost impossible. But Ripple is anything but decentralized.

I think the folks at Ripple may soon figure this out themselves. They will begin to realize that introducing a new currency isn’t just an issue of technological superiority. It’s also a political battle. And politics is a whole different realm. Consider the facts …

Fact: Sure, RippleNet is technologically superior to the Society for Worldwide Interbank Financial Transactions (SWIFT). But banks and governments have no stake in Ripple. They do have a stake in SWIFT. They flat-out own it.

Fact: The banks and regulators want that level of control. That’s how they can ultimately sanction renegade nations like Iran. All they have to do is shut the country out of SWIFT, and poof! Its currency and economy melt down. Clearly, SWIFT is more than just a transfer app for banks. It’s also a tool of geopolitical control.

Fact: Is RippleNet willing to be used in the same way? Perhaps. But the more likely scenario is this: International bankers and regulators wake up one morning and say: “Hey! Why the hell do we need RippleNet? All we have to do is co-opt their deal. We use the same blockchain technology. And we kiss Ripple, XRP and everyone behind them goodbye.”

Not exactly good for Ripple’s long-term future!



Comments 12

Deepak Joshi March 19, 2018

Overall a misleading article. XRP is used in one of the Ripple product called xRapid, it provides instant settlement and provides low cost liquidity to banks or payment proivders, who don’t have accounts in foreign countries. This way, these companies don’t have to keep their money sitting idle in the countries where they don’t need it instantly (about 10+ Trillion dollars are sitting idle). In my opinion, this is a great use case for XRP to free up that money for the companies and provide them instant liquidity, whenever required. Right now Ripple is concentrating only on this use case, but with XRP’s scalability, speed and cost per transaction, many other use cases are possible and can be explored. To read more about xRapid, please read:
I am not sure what you guys are upto, other cryptos are mere speculation, no regulatory framework, no real company, mere speculation. Please work hard on your analysis.

CryptoLand March 19, 2018

You guys need to quit finding faults in digital currencies and write the positives, which there are plenty of. It’s as if your writers believe that by pissing people off, you gain more readers. Based on your recent XRP article, I can tell than Juan has not watched all of the Brad garlinghouse videos/interviews. What Ripple is doing is setting up a foundation of banks which can one day, once regulations allows it, provide a way in which these banks can take back their billions of dollars that they have locked up in Nostro/Vostro accounts. Banks that use XRP not only save an additional 30% in fees (using Ripples software), but the banks will no longer need these Nostro accounts setup in every country that they transact with. That is a HUGE insentive for banks to use XRP!!! Sure the extra 30% savings, the fact that the banks no longer needs Nostro accounts is something that not even Swift’s GPI can provide!

You have also not written anything about the payment providers that are going to use XRP (money gram, etc). Or what about SBI Holdings in Japan – they have tweeted ‘we are all in on XRP’. Or what about the fact that Ripple is investing money into new startups that are willing to use XRP.

Ripples main goals for 2018 was XRP use cases.

I’m afraid that if you keep publishing negative articles without triple checking your facts, I am going to have to unsubscribe, and recommend to others that they do the same.

Edwin March 20, 2018

Ripple will “tokenize” the currencies and completely bypass the need to use the XRP token in the first place.
😀 and recreate the current problem with cross border transactions in a digital way.

Tony March 20, 2018

Interesting article by someone who either hasn’t done the proper research, or deliberately induces bias into his comments. Most of your fears / issues can be answered or rebuked with less than an hour of research….

Michael nardolillo March 20, 2018

Horribe article author is 99% wrong about all her ideas and beliefs of what xrp is and does. Xrp is a decentralized crypto that works better than any other for every use case, like merchant payments, it will not just be used for crossboarder. There are new startups coming with new use cases. PayPal can adopt xrp, it’s open source, this person has no clue about crypto clearly.

She is completly wrong. Ripple is a centralized company using xrp. Xrp is fully decentralized, open source, public key, permission less validators. 100% decentralized and this can be found with 1 second or researcher.

Disappoint people like her are even allowed to write being so uneducated about a subject.

Marek Flisinski March 20, 2018

The truth is like Mr Putin says:

“The Stone Age did not end due to the lack of stones, but because new technologies appeared.”

In Putin’s opinion, countries that are late to adopting this new technology, which he never mentions by name, “will very quickly fall under the dependence of the leaders of this development,” which is something that “Russia cannot allow this in any case:”

Putin has brought up the idea in the past of Russia launching its own “CryptoRuble,” but its legality and launch is a continuous grey area.

I think that international payments will have cryptocurrency made by regulators or ready to use Ripple or new multinational cryptocurrency with smart contracts based on Ethereum.

Micahel Nardolillo March 20, 2018

Please don’t trust the above article. This person is very uneducated on the space, and Fintech. Do the research yourself. Ripple CEO, and top employees, have XRP. They state, and prove ( remember everything is public on the ledger), that its in their best interest to grow the ecosystem, use case, and price of xrp. They are even investing in new startups to utilize xrp in new uses cases. Also XRP is open source, any company can use it in any way that works for them.

200+ banks are now on ripple net today ( 61 of those in japan), and the product is barley two years old.
11 of the worlds top 100 banks already use xcurrent on ripple net, and will use xrapid once beta is farther along. Both are meant to be used together. Credit Argile ( 2nd in europe), BBVA ( 2nd in spain), Santander, bank of America, MUFG( worlds 5th largest bank)

Xcurrent ( 2 years on market) and xrapid( 7 months in beta) are two processes to send money. One uses Fx prices, is 30% cheaper than traditional methods, and uses a pre-funded nostro for liquidity.

Xrp has a value, no need for a nostro to provide liquidity (frees up trillions around world). Its also instant, and is 60% cheaper than current methods by way of xrapid, and 95% cheaper than current methods by way of xvia{also uses xrp}).

All of these products are meant to work together. Xrapid ( uses xrp) is already being used live by cuallix and zipremit( over a month), and piloted by western union, Money Gram, Cambridge, IDT, Mercury FX, fleetco, SBI

Darrion March 20, 2018

Not sure where you did your research but you sir are misinformed about XRP.

Tore March 21, 2018

If this is the level of knowledge you are at when evaluating coins then I lose trust in that ABCD.

Caleb March 21, 2018

Mercuryfx, western union, IDT, money gram etc….what other crypto has this traction…I’m dumber for stopping by here……x rapid beta tests. Non of those are banks. Your lack of research is almost purposeful. And as far as your geopolitical warfare statement, won’t that incentivize more banks to move away from swift and western control? Say in remittance areas with friction in banking and populations that use these services to send money home. Thanks for confirming my first and last stop here, more relaviant ideas on the back of cereal box, 2.89 at any grocery store.

Charlie March 22, 2018

One thing clear is that this article only hurts the credibility of other reports of WEISS rating company.

XRP is good March 22, 2018

You don’t know about XRP any.
Please stop.