Sometimes the process of answering the great questions of you readers provides the best opportunity to share information. RJZ33 asked some very pointed and well phrased questions which prompted two very pointed and informative responses from me. Both questions from RJZ33 were around the future role of SDR in a growing crypto environment, and how the Ripple XRP crypto asset could function in a larger international role and free up trillions in global liquidity. This massive amount of liquidity could be just the thing to stave off a financial downward cycle and drive bull markets for decades. So for those of you who may have been wondering where the SDR went, or what my take on the future of the crypto markets may be, below is the exchange between myself and RJZ33.
So, if your hypothesis is correct with the XRP, then where does the SDR fit into this whole agenda? You were such a big believer/promoter in the SDR/Bancor becoming the next step in the multilateral transformation. Maybe I misinterpreted? Regardless, I’m now kind of confused as to where this multilateral agenda is heading? If you can provide some additional thoughts and clarification, I would appreciate it. Thanks!
IMF has a high level advisory group working on FinTech. Ripple co-founder Chris Larson is on that advisory group. I have said in the past that the SDR would merge with characteristics of crypto assets and all would become one. This could be the case, but the more I learn about the potential liquidity which is freed and becomes available with banks using XRP, the more I realize that the role of the SDR may be relegated to providing support to struggling economies. XRP is a much more efficient and cost-effect solution for a supra sovereign asset which can be used by all nations. The SDR may remain as a safety net. But in time I even see all fiat and bonds evaporating under the spread of crypto assets.
Putting forward information and evidence that the SDR was being prepped to replace the USD as the international reserve asset doesn’t mean I was a promotor of it. It was simply the best option which was being supported by nations and international institutions. The imbalances in the system needed to be corrected one way or another. Needless to say that XRP can correct these imbalances, while expanding world wide liquidity in the trillions, on a much larger scale than the SDR ever could have. Maybe its not a coincidence that crypto assets exploded in 2017 after Trump took office.
Regardless, the old order is fading away. You can feel it. New institutions and wealth are emerging on the world scene. Some older ones will die and never come back. Some may re-invent themselves and find a new use for their old tools, such as the SDR. I’ll write more about XRP and its function of releasing trillions of locked up liquidity in another post. – JC
Thanks for the additional information JC. Much appreciated. And, my apologies for using the word “promoter”. It wasn’t accurate as you state. Believer was probably the better descriptor?
So, let’s assume that the XRP becomes a supra-sovereign asset. With only 100 billion mined, isn’t this a limitation? Also, how does the world’s liquidity expand in the trillions with a limited quantity asset and an asset that organically reduces? I just don’t see it? Unless you are saying that XRP and some of the other crypto-currencies co-exist with all fiat currencies providing this additional liquidity? That I can see. If you could elaborate once more, I’d appreciate it. Thanks again!
I will be writing an article to expand on this , but here is a brief look at it.
Consider all the banks around the world which interact with the SWIFT system. On any given day there is $27 trillion in liquidity locked up in these nostro accounts. SWIFT international payments from bank to bank take 3 to 5 business days. Bank A is required to hold money in nostro accounts in all countries in which it does business or needs to transfer money, say to Bank B. Both bank A and B need to hold liquidity in these accounts. This is money which is not available for anything else, like loans or other funding projects, and is subjected to exchange rate fluctuations in that 3 to 5 days. Along with the $27 trillion, there is another $2 to $3 trillion wasted every year in SWIFT transaction fees.
Now imagine the Ripple XCurrent network completing these international payment transfers in just seconds using XRapid. Bank A will exchange domestic fiat currency for XRP and transfer to Bank B in another country in seconds. Bank B converts the XRP into their own domestic currency. The whole process takes 2 to 3 seconds and costs just pennies. The liquidity in Bank A and Bank B is no longer locked up in nostro accounts and each banks exposure to any volatility in XRP is just seconds.
This is just banks and does not consider other payment companies and massive retail customers, such as Amazon, Uber, etc..
The growing demands on an ever shrinking 100 billion XRP will drive the price higher based on basic economic principles. The valuations of XRP will matter little to other domestic cryptos, which will likely evolve from the existing fiats. Each interaction will only take seconds and minimize the risk to any fluctuations. XRP will become the standard which the whole world will use to serve in a reserve capacity. Though the function of XRP is beyond anything which could have been dreamed up for the USD. It is evolving everything. Once you understand what XRP and XCurrent are, and how the growing list of partnerships are cornering the market, the potential for XRP appreciation is obvious.
Hope this helps. – JC
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