CBDCs, institutional adoption, etc.
Ripple’s Senior Vice President of Engineering (SVP), Devraj Varadhan, believes that the general market will shift from speculative crypto projects to ones developing solutions that solve real-world problems. With the vision Varadhan describes and echoed by other Ripple executives, it is clear that Ripple aims to grow their activity in this arena.
Furthermore, the company expects countries outside of Europe to run CBDC pilots this year. More importantly, the focus will be on “ interoperable CBDC solutions that enhance cross-border payments,” which is the bread and butter of Ripple Labs and their native XRP token. All in all, Young summed up Ripple’s expectations for crypto in the blog:
“Banks and other large financial institutions will invest in new technologies with an expectation of realizing the benefits, not in days and weeks, but in years, so we see the embrace of digital assets and blockchain continuing throughout 2023 and beyond.”
The future vision laid out by Ripple’s executives also sees NFTs moving away from digital artworks and to real-world use cases, especially in real estate markets and carbon markets. Aside from the future the company sees, there is the current matter of Ripple fighting a legal battle that has the potential to prevent them from reaching its goals.
Ripple vs. the SEC
The legal battle between the U.S. Securities and Exchange Commission (SEC) and Ripple has been going on for quite some time and has kept the price of XRP low compared to its all-time highs. The legal saga is in its finishing stages, as most experts predict, with the issues surrounding the “Hinamn documents” being the more recent legal battle in the court case.
In the same Ripple Labs blog, Stuart Alderoty, General Counsel of Ripple, claimed that the Ripple vs SEC battle is a battle they’re waging on behalf of the entire crypto space.
“We’ve fought this case on behalf of the entire crypto industry and American innovation so we can gain the regulatory clarity we desperately need for crypto innovation to flourish in the United States.”
While it is still unclear what the courts’ final decision will be in this case, most experts believe that the SEC will not come out as a winner. This could be positive news for the entire industry, though it is hard to predict what will happen regardless of the outcome.
Role of XRP ledger in CBDCs
A country in which Ripple is very active, starting in 2023, is the United Kingdom (UK), where they, among other things, delivered a keynote on potential use cases and benefits of a digital pound. This discussion was hosted by the Digital Pound Foundation, an organization that Ripple joined in 2021. The Foundation’s main focus is to develop and launch a digital pound.
It is currently unknown to which extent the XRP Ledger and the XRP token will play a role in a potential digital pound. However, cooperation with foundations and jovernment bodies is key if a company wants to be successful in creating a CBDC.
In a recent interview, Brooks Entwistle, SVP and MD at Ripple, stated that the company is taking a targeted approach without looking to implement a solution for every central bank.
“We’ve realized that we’re not going to solve that problem for every single central bank around the world – we are very targeted. We found great interest in some of the smaller central banks around the world that are looking for a strategy or a partner, looking for a technology, a side blockchain, some ideas on how to go about this.”
XRP in Montenegro
Staying true to its mantra, Ripple recently met the Prime Minister of Montenegro to discuss cooperation on a payment infrastructure that would allow more financial inclusion for the citizens of Montenegro and possibly the Balkans. It is alleged that Montenegro is looking to create its own stablecoin directly from the Central Bank. The Balkan country has been waiting for EU ascension since 2008 and has been using the Euro as its currency for over 20 years. Creating a Montenegrin CBDC could help the country fill the gap of a national currency they could call their own.
This is the second big move the country has made in the world of crypto after hosting an event that featured Ethereum’s co-founder Vitalik Buterin, who was subsequently granted Montenegrin citizenship.
CBDC on XRP
The XRP Ledger was created in 2012 by David Schwartz, Jed McCaleb, and Arthur Britto with XRP the native currency of the XRP Ledger. This token could in one sense carry a CBDC on itself, representing a type of an IOU (I owe you note) represented by XRP. Fast settlement times XRP offers could be one of the main selling points in this instance.
Another possibility is for CBDC’s to use a gateway on the XRP Ledger that will allow depositing and withdrawing CBDCs. This means that such a CBDC could be used interchangeably with XRP and other digital assets on the XRP Ledger.
Finally, the third option, which is the least likely, is for a CBDC to be pegged to XRP, and interact with the Ledger as a stablecoin of sorts. This could be used to speed up cross-border transactions and reduce costs, but it would also mean that Ripple Labs is the owner of a country’s CBDC.
The latest developments and expectations from Ripple Labs point to the fact that the business model is maturing. If the company “chased every new shiny thing”, as it seemed to be doing so initially, the business model would be diluted. The focus by the firm on small governments and small central banks allows Ripple to focus on holistic solutions, which can bode well if and when they sign larger central banks.
As there are a lot of players in the field, interoperability will be an important aspect of the entire CBDC niche in crypto. Ripple Labs is positioned as one of the leaders that have been in the forefront of the industry. However, this does not guarantee that they will be a de facto leader in the future. At the time of writing, the laid-out plan puts them on the trajectory of being the central authority for CBDC. But crypto is evolving at lightning speeds, with leaders and change happening faster than in other areas. Therefore, stay tuned!