Ripple Optimistic as U.S. Banks Eye Adoption of XRP for Cross-Border Payments

Blockchain startup Ripple is anticipating a surge of interest from U.S. banks and financial institutions regarding adopting XRP for cross-border payments following a groundbreaking ruling that established the token’s independence from securities classification.

Stu Alderoty, Ripple’s general counsel, revealed in an interview with CNBC that the San Francisco-based firm plans to initiate discussions with American financial entities about integrating its On-Demand Liquidity (ODL) product, which leverages XRP for seamless money transfers in the third quarter.

The recent ruling by a New York judge has marked a turning point for Ripple by affirming that XRP, the cryptocurrency closely associated with the company, is “not necessarily a security on its face.” This decision challenges the claims made by the U.S. Securities and Exchange Commission (SEC) against Ripple, and its implications have been swift.

One notable impact of the ruling is the rapid response from cryptocurrency exchanges like Coinbase, which had previously delisted XRP due to the SEC lawsuit. In light of the ruling, these exchanges have decided to relist XRP, leading to a substantial surge in its price.

The legal battle between Ripple and the SEC has been ongoing for the past three years, with the SEC accusing Ripple and two executives of conducting an unlawful $1.3 billion offering through the sale of XRP. Throughout this time, Ripple has vehemently refuted the allegations, contending that XRP should be classified as a commodity rather than a security.

Consequently, Ripple endured setbacks, losing both customers and investors. Notably, MoneyGram, a prominent U.S. money transfer giant, terminated its partnership with Ripple in March 2021. Furthermore, Tetragon, a U.K.-based investor that had previously supported Ripple, sold its stake back to the company after unsuccessful attempts to sue for cash redemption.

When asked whether the ruling would encourage American banks to resume using Ripple’s ODL product, Alderoty expressed confidence, stating, “I think the answer to that is yes.”

We’re hopeful that this decision would give financial institution customers or potential customers comfort to at least come in and start having conversations about what problems they are experiencing in their business regarding moving value across borders without incurring obscene fees,” Alderoty added.

Ripple’s utilization of blockchain technology facilitates secure messaging between banks, offering an alternative to the traditional Swift network.

Alderoty hoped the court’s decision would instill trust and prompt financial institutions to discuss real-world challenges in cross-border value transfer, particularly the exorbitant fees associated with such transactions.

He emphasized the potential for extensive conversations and tangible business opportunities in the United States during the current quarter.

Although Ripple derives most of its business from international markets, Alderoty acknowledged that the ruling could impact the company’s operations, prompting them to evaluate its implications thoroughly.

Ripple, which boasts a global workforce of over 900 employees, with approximately half based in the U.S., relies on XRP as a “bridge” currency, facilitating seamless transfers between different fiat currencies and eliminating the need for pre-funded accounts.

With a market capitalization of $37.8 billion, XRP currently holds the position of the fifth-largest cryptocurrency in circulation.

Partial Victory For Ripple

Nevertheless, while the ruling declared XRP independent of securities classification, it did not represent an outright victory for Ripple. The judge also acknowledged that certain token sales qualified as securities transactions.

For instance, the judge noted that approximately $728.9 million in XRP sales to collaborating institutions did meet the criteria for securities, citing the presence of a common enterprise and an expectation of profit.

Alderoty conceded that the ruling was not a complete triumph for Ripple and mentioned the company’s intention to assess its implications, particularly how they affect Ripple’s business operations.

“She [Judge Analisa Torres] found — although we had disagreed with her — that our earlier sales directly to institutional buyers had the attributes of a security and should have been registered,” he stated.

Regarding the impact on Ripple’s existing operations, Alderoty clarified that this aspect of the ruling would have no immediate consequences since the company’s primary clientele resides outside the U.S.

Nonetheless, Ripple plans to analyze the judge’s decision and evaluate the needs of its clients and the market, exploring potential compliance measures for institutional transactions within the bounds set by the ruling.