Ripple and the Central Bank Summit

Economics, Premium POM26 Comments

Replacing USD Denominated SWIFT with the XRP World Digital Asset

Numbers and letters. Letters and numbers. The combinations can be both exciting and intimidating. As an example, the H3N2 influenza virus is making the rounds throughout the West, and I may, or may not, have it. Definitely feels like it. Outside of letter and number combinations, that has absolutely nothing to do with this article.

Researching the blockchain technology and the deep field of cryptocurrencies which are now available across numerous exchanges has been a fascinating endeavour. It doesn’t take long to understand that Bitcoin is now so outdated that it must only be running on momentum. But Bitcoin is serving the purpose of drawing large numbers of people into the world of blockchain and the wonders of tomorrow.

When I wrote the article on Ethereum it was valued at around $430 USD. That was on December 10, 2017. One month later and Ethereum has appreciated to the $1400 USD range. That is a substantial increase. But while Ethereum is a de-centralized crypto, the centralized Ripple has been performing equally as well.

Back when the Ethereum post was written, Ripple, or XRP, what the digital asset by Ripple is called, was valued at $0.74 USD. It spiked above $3.00 USD and has since dropped back down to around $1.90 USD at the time of this writing. Wow. On both.

These type of value swings are almost unheard of in the old world of stocks and bonds. Outside of an outlier here and there over the years. So just what is happening in this new world of blockchain and high speed payment transfers?

Comparisons made between the SWIFT international payment system and the Ripple payment system involve imagining a horse and buggy attempting to outrun the high speed Tesla performance car. Those who do not immediately grasp the importance of this will not be able to take advantage of the opportunities which are being presented.

In April of 2016 HSBC’s Global Head of Payments Innovation jumped ship to join Ripple as Global Head of Strategic Accounts. Marcus Treacher also served on the Global Board of Swift from 2010 to 2016. This was followed in April of 2017 with Ripple attracting SWIFT Executive Marjan Delatinne, who was responsible for customer engagement on global payments innovation with SWIFT.

SWIFT executives involved with payments innovation moving over to Ripple is a huge indicator on which direction the international monetary architecture is moving. SWIFT can fine tune some processes and tighten loose bolts on the wagons wheels, but it still will never be able to match the performance of the race car. No time to waste on the past.

The Federal Reserve released a report last year after two years working on its Faster Payments Task Force. One of the actions from that report was the use of Ripple as the foundation to support the next generation of cross-border payments. Ripple was the choice over SWIFT, and it was only a few days after this report was released that the International Monetary Fund stated it was interested in using blockchain technology in its operations with member nations and the function of the Special Drawing Right (SDR).

At the beginning of November, 2017, Ripple hosted a Central Bank Summit in New York. Little has been written about this summit, and it has appeared to remain off the radars of most analysts and economic writers.

IMF Deputy Director Dong He gave a speech at that conference where he discussed cross-border payments and CBDCs, or Central Bank Digital Currencies. Alongside suggesting that central banks could implement digital versions of the domestic currency they represent, he also stated the following:

Other characteristics of CBDCs, however, would differentiate them from commercial-bank reserves in one or several ways. Importantly, whether interest is paid on a CBDC or not has important and differing implications for the transmission and effectiveness of monetary policy, as well as for financial stability. A non-interest-bearing CBDC would be a better substitute for cash than for bank deposits, an interest-bearing one for bank deposits. The latter may affect the transmission mechanism and financial stability more than the former.”

What is being said here is that regular consumer payments can use something based on Ripple, but bank deposits would still require to be connected to interest bearing assets. The separation of a currency into a non-interest bearing segment and a interest bearing segment is interesting. It would in essence create dual-purpose digital currencies which change function based on their location and status.

Such a thing would never have been possible without blockchain technology.

The role of the SDR in reference to foreign exchange reserves and quota amounts based on the financial and economic performance of a nation will need to accommodate the emergence of blockchain and the XRP digital asset by Ripple, for the same reason that SWIFT is now obsolete.

Ripple is fast becoming the standard on payment transfers. At the end of 2017 a partnership had been announced between Ripple and MoneyGram. This will be followed in 2018 with partnerships between Ripple and Amazon, Uber, Apple Pay, Visa, MasterCard, and a host of other banks and financial institutions. Ripple already has such partnerships with over 100 institutions.

It is clear that Ripple market capitalization will be growing as its acceptance moves forward. There are 100 billion units of XRP created with 60% still being held by Ripple. Some are suggesting that Ripple could dump these units onto the XRP market and drive the price of Ripple down. But this would not support the stability needed to continue making XRP a stable asset which can be used as an internal payment system.

Transferring international payments with SWIFT takes 2 to 5 business days. With Ripple it will take 5 seconds and reduce costs tremendously. Nothing can stop this change from taking place. It’s the difference between traditional snail mail and email.

Everyday there is on average $27 trillion tied up in SWIFT accounts. The fees and costs of transferring such large amounts through SWIFT can be reduced to just cents. When you add in the amount of USD and other reserve currencies being held in the foreign exchange reserve accounts of central banks around the world, the possible valuations for the full 100 billion units of XRP becomes mind-boggling. Not to mention the market capitalization of Visa, Amazon, and all the other customers that are interested in using Ripple.

Ripple will need to be careful not to let XRP appreciate too high and too fast, as that would also create the instability which would undermine its role as a payment system. But there could also be some benefits associated with such a fast appreciation. Think of all the debt being held in the foreign exchange reserve accounts, such as US Treasury debt. Transferring all of that debt into Ripple would drive the valuation of the full 100 billion units and would prevent markets from crashing and currencies hyper-inflating.

Some made the case over the years that gold would go to $10,000 per ounce to accommodate this large amount of money printing. Though gold will play a role for sure, it is starting to look more likely that Ripple, and other cryptos, like Ethereum, will provide the method by which debt-based liquidity is turned into functional crypto liquidity. Add the SDR into the mix to bridge the debt between domestic fiat currency and XRP, and you have the blockchain structure for a whole new world monetary and financial system.

Everything we have learned about the SDR, substitution accounts, quota amounts, and the reduction of foreign exchange reserves, is still relevant in this new crypto world. Ethereum and Ripple have just made it all that much more exciting. And of course what will be the geopolitical ramifications of the death of USD denominated SWIFT?  Perhaps we are already seeing some of that in the lead up to big Ripple announcements and the unfolding Trump agenda.

Who would have thought that numbers and letters could be so fascinating.  – JC

This article is copyrighted by POM Media©2017. As Premium content permission is not given to be copied and re-posted.

JC Collins can be contacted at jcollins@philosophyofmetrics.com

26 Comments on “Ripple and the Central Bank Summit”

  1. How interesting and timely for me personally.

    I have 4 ETH which I purchased this time last year for an average of $75 each. So $300 investment turns into >$5,000. I will still be holding.

    I actually downloaded the XRP app but haven’t done anything yet. I believe for now XRP cannot be purchased with USD but only with BTC and maybe ETH(?).

    Anyways….because of your article I’m thinking…..well, you know. Thanks for the info as always.

    1. You can buy XRP with USD money transfer at http://www.kraken.com. We are buying XRP with CAD on Kraken. Takes a few weeks to get verified though, so I would get started if you’re interested. Remember Christmas of 2016 when I wrote about drinking a rum called Kraken? Patterns. lol

  2. Hello JC,
    Very interesting article and times right now.
    What are your thoughts on the Dong compared to Ripple?
    Do you still see the potential of the Dong or do you think there is more substance in the Ripple?
    Thanks as always for your blog and articles!
    // Stefan

  3. Hi JC,

    speaking of patterns: the currency symbol of Ripple is identical to that of the mafia/triades used in QANONS file dump

    https://i.pinimg.com/originals/ca/90/76/ca9076e074bafcdf4fb8480529557fce.gif

    Bitcoin for sure is outdated on a technical perspective. Speed and cost of transfer. Puuuh. No questions about that. IMHO, one cannot compare Bitcoin to Ripple without addressing these questions:

    – Why is Bitcoin the only crypto listed as a separate commodity?

    – Why is Bitcoin the new toy for the Wall Street boys? There are futures, option products, ETFs only for Bitcoin. THAT is liquidity. What does that say for the future and importance of Bitcoin? Substantial amounts of instutional money keep moving into Bitcoin.

    – Why is Bitcoin subdivided in 1.000.000 Satoshis and Ripple is not? Wouldn`t that make Bitcoin a better currency? 1 Satoshi is the new 1 Dollar?

    Play with

    http://place.org/~jbone/calculate-future.html

    and move the “Percentage used for transactions” slider down to 1%. That mirrors the technological shortcomings of Bitcoin in respect of transaction mean. Now use the upper slider (GDP/prices denominated in Bitcoin, % of world economy).

    JC, I`m not a blindfolded PRO BITCOIN person (I hodl BTC, ETH and XRP). But your reasoning about Bitcoin is focused on technical issues. It is exactly that technical limitation that could make its price go up. The “debt transfer argument” is as good for Bitcoin as it is for Ripple or any other of the top
    ten crypto´s.

    If parts of the excessive debt will be PARKED in a crypto (or a basket of cryptos) that is not suitable for transactions, wouldn`t that be a lot more useful towards a more balanced multilateral system than just simply transfer the existiting debt to a crypto thus keeping all of that debt in the system? Isn`it all about ratios, Debt/ GDP? A bit Less debt, a bit more GDP and all is well?

    Liquidity for sure can be provided with yet another crypto but that doesn`t mean its price must go to the moon. Ripple is NOT limited to 100 billion units. There are 100 billion AT PRESENT. Make no mistake here.

    NS: Any thoughts on the crypto BANCOR? Its name is very suggestive and they have Bernard Ljetaer onboard… catholic, big IWF + BIS guy, expert on complementary currencies.

  4. Here are a few research articles that were interesting.

    “RIPPLE Vs. SWIFT”

    https://www.ripplecoinnews.com/ripple-vs-swift

    “Ripple vs SWIFT: payment (r)evolution”

    http://treasurytoday.com/2017/07/ripple-vs-swift-payment-r-evolution-ttpv

    “Ripple vs. Swift rivalry heats up; banking may be ultimate winner”

    https://www.paymentssource.com/news/ripple-vs-swift-rivalry-heats-up-banking-may-be-ultimate-winner

    “How Ripple Works”

    https://www.youtube.com/watch?v=vpF2-_qV2EA

  5. Lots of excitement about Cryptos for sure but the mania is also potentially opening up areas for fraud as these two links highlight:

    https://techcrunch.com/2018/01/15/researchers-finds-that-one-person-likely-drove-bitcoin-from-150-to-1000/

    Lots of companies involved with Name Changes or starting “Blockchain Initiatives” that may have merit or may just be bogus…

    http://investmentresearchdynamics.com/the-blockchain-name-change-game-and-securities-fraud/

  6. “Utility Settlement Coin concept on blockchain gathers pace
    BNY Mellon, Deutsche Bank, ICAP and Santander join UBS and Clearmatics to advance the Utility Settlement Coin concept, and plan tests in a real-market environment.”

    https://www.db.com/newsroom_news/2016/medien/utility-settlement-coin-concept-on-blockchain-gathers-pace-en-11661.htm

    “Barclays, HSBC Join Settlement Coin as Bank Blockchain Test Enters New Phase”
    “Several of the world’s largest banks have today revealed a series of steps to advance a project aimed at making it easier for central banks to issue currencies on a blockchain.”

    https://www.coindesk.com/hsbc-barclays-join-utility-settlement-coin-as-bank-blockchain-test-enters-final-phase/

    “One Coin (Platform) to Rule Them All: Utility Settlement Coin”

    http://tabbforum.com/opinions/one-coin-platform-to-rule-them-all-utility-settlement-coin

  7. Hmmm. Could this be a reason for the crypto bloodbath?

    “Before people get all worried, do note that Bitcoin losing more than 50 percent of it’s value is occurring after President Trump signed his December 21st Executive Order targeting assets involved in Human Rights violations, Human/Child trafficking, and corruption. This Bitcoin crash that now stands at more than a 10,000 dollar lost…Just so happens to be taking place at the same time as this recent Trump Executive Order that basically targets assets of evil.”

    http://www.puppetstringnews.com/blog/are-dirty-bitcoin-assets-being-frozen-bitcoin-now-at-9300-loses-more-than-half-its-value

    1. Yeah onrgaia I have been reading how Bitcoin lacks the “smart contract” capability. As such maybe Bitcoin will suffer some while they crack down on the deceptive money movement. Just like the world has been wanting to do with money laundering of fiat currencies and CIA drug money.

      I’ve been following the Ethereum which has smart contracts incorporated into them and a lot of ICO’s seem to back their tokens with the Ethereum. From what I understand so far each transaction has each parties personal information cryptographically embedded into the blockchain or currency so there is always a record of the transaction.

  8. “Ripple” has great name recognition as far as being a product that a small time investor could of done well with. Did you know that if you would of bought a bottle of it for $1.00 in 1980 and held on to it, that it would be worth $400. 00 today? Not bad. Patterns?

    PTM

      1. Dane my good man,
        MD (Mad Dog) 20’/20, was a Mogen David, Ripple was a E and J Gallo. Thunderbird was the word. What was them price? Fifty twice!!

        Point I was trying to make. There is more in my mind than a buck to be made in crypto/A.I., Quantum tech. There is a human factor that needs to be considered, if indeed the investment is to be sound..

        The strength of the block and tackle chain is but weak of it’s greed link. If it is only money to be made we miss the point. This logic machine has the potential
        to organize our world, and take us off world, were we must go. So looking at it from that stand point, I suggest we all invest accordingly.

        PTM

  9. Some information worth noting:
    Ripple Labs Inc. Resolves Criminal Investigation
    May 5, 2015
    https://www.justice.gov/opa/pr/ripple-labs-inc-resolves-criminal-investigation
    https://www.justice.gov/sites/default/files/opa/press-releases/attachments/2015/05/05/settlement_agreement.pdf

    While Ripple did fail to meet some industry standards at the time, more so this investigation highlights the transactions that potentially occurred between Ripple and some bad actors. Anyways, it seems everyone learnt a lesson and Ripple has moved forward. It reads as if some youngsters got involved in something (financial laws) they knew nothing about and stumbled their way through to success ($1.3 million settlement).

    1. Man I wish Kraken would hurry up and approve my account….Ripple is climbing in price 🙂

      Come on Kraken, hold true to your slogan and “release the Kraken” already….lol.

  10. I got ya Peter. “Render unto Caesar the things that are Caesar’s, and unto God the things that are God’s”

    https://en.m.wikipedia.org/wiki/Render_unto_Caesar

    If building outer wealth while neglecting inner wealth creates an imbalance to the wholeness of being, then so would building inner wealth while neglecting outer wealth.

    How many millionaires are the cryptos creating who cannot fathom this concept? How many can?

  11. “Today’s Payment Rails Don’t Cut It

    In a world where three billion people are connected online, cars drive themselves and appliances can communicate, global payments are still stuck in the disco era.

    Why? The payment infrastructure was built before the Internet with few updates.”

    https://ripple.com/

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